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Begin New Search Topic Economics Content Type Working Paper Publishing Institution Center for Global Development

81. Failed States, Vicious Cycles, and a Proposal

Author:
Raghuram G. Rajan
Publication Date:
03-2011
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Rajan examines the problems of failed states, including the repeated return to power of former warlords, which he argues causes institutions to become weaker and people to get poorer. He notes that economic power through property holdings or human capital gives people the means to hold their leaders accountable. In the absence of such distributed power, dictators reign. Rajan argues that in failed states, economic growth leading to empowered citizenry is more likely if a neutral party presides. He proposes a unique solution to allow the electorate to choose a foreigner, who would govern for a fixed term. Candidates could be proposed by the UN or retired leaders from other countries; they would campaign on a platform to build the basic foundations of government and create a sustainable distribution of power. Rajan emphasizes that this is not a return to the colonial model—the external candidate (like all the others) would be on a ballot and the electorate would choose whether he or she was their best chance to escape fragility.
Topic:
Democratization, Development, Economics, Government, and Fragile/Failed State
Political Geography:
United Nations

82. Financial Integration and Foreign Banks in Latin America: Do They Amplify External Financial Shocks?

Author:
Liliana Rojas-Suarez, Arturo J. Galindo, and Alejandro Izquierdo
Publication Date:
02-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper explores the impact of international financial integration on credit markets in Latin America. Using a cross-country dataset covering 17 Latin American countries between 1996 and 2008, the authors find that financial integration amplifies the impact of international financial shocks on aggregate credit and interestrate fluctuations. Despite this pernicious effect, the net impact of integration on deepening credit markets is positive and dominates for the large majority of states of nature. The paper also uses a detailed bank-level dataset covering more than 500 banks in Latin America for a similar time period to explore the role of financial integration—captured through the participation of foreign banks—in propagating external shocks. The authors find that interest rates charged and loans supplied by foreign-owned banks respond more to external financial shocks than those supplied by domestically owned banks. However, this result does not hold for all foreign banks: Spanish banks in the sample behave more like domestic banks and do not amplify the impact of foreign shocks on credit and interest rates. Important policy recommendations to avoid foreign banks' amplification of external financial shocks include the establishment of ring-fencing mechanisms, the development of early-warning systems, and the incorporation for agreements between domestic and foreign supervisors.
Topic:
Economics and Markets
Political Geography:
Latin America and Spain

83. The International Financial Crisis: Eight Lessons for and from Latin America

Author:
Liliana Rojas-Suarez
Publication Date:
01-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The international financial crisis of 2008–09 exposed the strengths and weaknesses of the current paradigm of development in Latin America, a paradigm based on liberalized capital accounts and significantly improved macroeconomic conditions. This paper presents lessons derived from the crisis, not only for the region itself, but also for other developing countries that might seek economic growth in the context of greater integration to the international capital markets. Some of the lessons are not new but have been reinforced by the crisis, such as Latin America's imperative need for export diversification (not only in products but in partners). Other lessons break with longstanding myths about the region, such as its inability to undertake counter-cyclical policies—at least on the monetary side. Yet other lessons reflect new developments in the current growth paradigm, such as a renewed assessment of (1) the relative roles of foreign and domestic banks in shielding the financial system against external shocks and (2) the potential costs of adopting blanket international financial regulations that do not account for a country's degree of development. Taken together, the lessons in this paper bring a new sense of optimism for growth in Latin America.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
Latin America

84. The Costs and Benefits of Duty-Free, Quota-Free Market Access for Poor Countries: Who and What Matters

Author:
Kimberly Elliott, Antoine Bouët, David Laborde Debucquet, and Elisa Dienesch
Publication Date:
03-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper examines the potential benefits and costs of providing duty-free, quota-free market access to the least developed countries (LDCs), and the effects of extending eligibility to other small and poor countries. Using the MIRAGE computable general equilibrium model, it assesses the impact of scenarios involving different levels of coverage for products, recipient countries, and preference-giving countries on participating countries, as well as competing developing countries that are excluded. The main goal of this paper is to highlight the role that rich and emerging countries could play in helping poor countries to improve their trade performance and to assess the distribution of costs and benefits for developing countries and whether the potential costs for domestic producers are in line with political feasibility in preference-giving countries.
Topic:
Economics, International Political Economy, International Trade and Finance, Markets, and Third World

85. The (Indispensable) Middle Class in Developing Countries; or, The Rich and the Rest, Not the Poor and the Rest

Author:
Nancy Birdsall
Publication Date:
03-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Inclusive growth is widely embraced as the central economic goal for developing countries, but the concept is not well defined in the development economics literature. Since the early 1990s, the focus has been primarily on pro-poor growth, with the "poor" being people living on less than $1 day, or in some regions $2 day. The idea of pro-poor growth emerged in the early 1990s as a counterpoint to a concern with growth alone (measured in per-capita income) and is generally defined as growth which benefits the poor as much or more than the rest of the population. Examples include conditional cash transfers, which target the poor while minimizing the fiscal burden on the public sector, and donors' emphasizing primary over higher education as an assured way to benefit the poor while investing in long-term growth through increases in human capital. Yet these pro-poor, inclusive policies are not necessarily without tradeoffs in fostering long-run growth. In this paper I argue that the concept of inclusive growth should go beyond the traditional emphasis on the poor (and the rest) and take into account changes in the size and economic command of the group conventionally defined as neither poor nor rich, i.e., the middle class.
Topic:
Economics, International Political Economy, Poverty, and Foreign Aid

86. Open Markets for the Poorest Countries: Trade Preferences That Work

Author:
Kimberly Ann Elliott
Publication Date:
04-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Trade preference programs are an important and underused tool for stimulating exports, creating jobs, reducing poverty, and promoting prosperity and stability in poor countries. While many rich countries provide special access for exports from the least developed countries (LDCs) to promote these benefits, the trade preferences often do not extend to the products that matter most to LDCs, such as agriculture and clothing. Improving these programs could make a major difference in the lives of the poor, while having minimal effects on production or exports in preference-giving countries because the affected trade is so small: less than 1 percent of global exports are from LDCs. And, in the longer term, improved trade preferences for LDCs will promote shared prosperity and stability in rich and poor countries alike. Recognizing the role of trade in poverty reduction, the UN's Millennium Development Goals (MDGs) for poor countries call on high-income countries to provide duty-free, quota-free market access for the LDCs.
Topic:
Development, Economics, International Political Economy, International Trade and Finance, Poverty, and Third World

87. Are Borders Barriers? The Impact of International and Internal Ethnic Borders on Agricultural Markets in West Africa

Author:
Jenny C. Aker, Michael W. Klein, Stephen A. O'Connell, and Muzhe Yang
Publication Date:
04-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper addresses two important economic issues for Africa: the contribution of national borders and ethnicity to market segmentation and integration between and within countries. Market pair regression analysis provides evidence of higher conditional price dispersion for both a grain and a cash crop between markets separated by the Niger-Nigeria border than between two markets located in the same country. A regression discontinuity analysis also confirms a significant price change at the international border. The international border effect is lower, however, if the cross-border markets share a common ethnicity. Ethnicity is also linked to higher price dispersion within Niger; we find a significant intranational border effect between markets in different ethnic regions of the country. This suggests that ethnic similarities diminishing international border effects could enhance international market integration, and ethnic differences could contribute to intranational market segmentation in sub-Saharan Africa. We provide suggestive evidence that the primary mechanism behind the internal border effect is related to the role of ethnicity in facilitating access to credit in agricultural markets. We argue that the results are not driven by differences in price volatility or observables across borders.
Topic:
Agriculture, Economics, Ethnic Conflict, and Markets
Political Geography:
Africa, West Africa, and Nigeria

88. The Washington Consensus: Assessing a Damaged Brand

Author:
Nancy Birdsall, Augusto de la Torre, and Felipe Valencia Caicedo
Publication Date:
05-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In this paper we analyze the Washington Consensus, which at its original formulation reflected views not only from Washington but also from Latin America. We trace the life of the Consensus from a Latin American perspective in terms of evolving economic development paradigms. We document the extensive implementation of Consensus-style reforms in the region as well as the mismatch between reformers' expectations and actual outcomes, in terms of growth, poverty reduction, and inequality. We then present an assessment of what went wrong with the Washington Consensus-style reform agenda, using a taxonomy of views that put the blame, alternatively, on (i) shortfalls in the implementation of reforms combined with impatience regarding their expected effects; (ii) fundamental flaws—in either the design, sequencing, or basic premises of the reform agenda; and (iii) incompleteness of the agenda that left out crucial reform needs, such as volatility, technological innovation, institutional change and inequality.
Topic:
Economics
Political Geography:
Washington and Latin America

89. Mobile Phones and Economic Development in Africa

Author:
Jenny C. Aker and Isaac M. Mbiti
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We examine the growth of mobile phone technology over the past decade and consider its potential impacts upon quality of life in low-income countries, with a particular focus on sub-Saharan Africa. We first provide an overview of the patterns and determinants of mobile phone coverage in sub-Saharan Africa before describing the characteristics of primary and secondary mobile phone adopters on the continent. We then discuss the channels through which mobile phone technology can impact development outcomes, both as a positive externality of the communication sector and as part of mobile phone-based development projects, and analyze existing evidence. While current research suggests that mobile phone coverage and adoption have had positive impacts on agricultural and labor market efficiency and welfare in certain countries, empirical evidence is still somewhat limited. In addition, mobile phone technology cannot serve as the “silver bullet” for development in sub-Saharan Africa. Careful impact evaluations of mobile phone development projects are required to better understand their impacts upon economic and social outcomes, and mobile phone technology must work in partnership with other public good provision and investment.
Topic:
Economics
Political Geography:
Africa

90. The Roots of Global Wage Gaps: Evidence from Randomized Processing of U.S. Visas

Author:
Michael Clemens
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This study uses a unique natural experiment to test a simple model of international differences in workers' wages and productivity. Large differences in wages across countries could arise from several sources. These include barriers to trade in outputs, differences in technology, differences in workers, or differences in the other factors of production accessible in different countries. To measure the relative importance of these sources in one setting, this study exploits the randomized processing of U.S. visas for a group of Indian workers who produce software within a single multinational firm. In this setting, international barriers to trade in outputs, barriers to technology transfer, and all observable or unobservable differences between workers are extremely low. The results indicate that location outside of India causes a sixfold increase in the wages of the same worker using the same technology to produce a highly tradable good. Under plausible assumptions about competition in the industry, this suggests that country-of-work by itself is responsible—in this industry—for roughly three-quarters of the gap in productivity between workers in India and workers in the richest countries. These findings have implications for open questions in labor, growth, international, and development economics.
Topic:
Economics and Labor Issues
Political Geography:
United States and India

91. Inside the World Bank's Black Box Allocation System: How Well Does IDA Allocate Resources to the Neediest and Most Vulnerable Countries?

Author:
Benjamin Leo
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
During the last few International Development Association (IDA) replenishment negotiations, several large donors have pressed for reforms to further increase the share of IDA resources provided to the neediest and most vulnerable countries. While the proposed reforms take different forms, the philosophical Thrust is the same—push IDA's focus further down the development chain. Against this backdrop, this paper explores just how well IDA's existing performance-based allocation (PBA) system actually addresses these issues. To achieve this, I examine how IDA allocations are distributed at each successive stage of the PBA methodology based upon a number of need and vulnerability measures. Next, I apply two simple measures to gauge IDA's performance: (1) whether per-capita allocations to the neediest and most vulnerable countries are equal to or greater than those for the best off countries and (2) whether allocations to the neediest and most vulnerable countries increase between the baseline and final allocation scenarios. Based on these criteria, IDA has a mixed track record. IDA's performance is very modest with respect to the relative share allocated to the neediest or most vulnerable countries. Of the eight measures examined, only two illustrate parity between final allocations to the bottom and top quartile of countries. However, the litany of PBA exceptions clearly helps to redistribute resources in absolute terms. Per-capita allocations to the neediest and most vulnerable countries more than doubles between the baseline and final PBA scenarios for every need and vulnerability indicator examined. Clearly, the existing system has several built-in biases to redistribute resources to these countries. However, these exceptions fall short from ensuring full parity that some IDA donors may wish to achieve. As such, the philosophical debate among key IDA donors likely will continue for the foreseeable future.
Topic:
Development, Economics, Foreign Aid, and Financial Crisis

92. Beyond Population: Everyone Counts in Development

Author:
Joel E. Cohen
Publication Date:
07-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This essay reviews some of the most important demographic trends expected to occur between 2010 and 2050, indicates some of their implications for economic and global development, and suggests some possible policies to respond these trends and implications. The interactions of population, economics, the environment, and culture are central. In the past decade, for the first time in history, old people outnumbered young people, urban people outnumbered rural people, and women of reduced fertility outnumbered women of high fertility. The century from 1950 to 2050 will have included the highest global population growth rate ever, the largest voluntary fall in the global population growth rate ever, and the most enormous shift ever in the demographic balance between the more developed regions of the world and the less developed ones. In the coming half century, according to most demographers, the world's population will grow older, larger (albeit more slowly), and more urban than in the 20th century, but with much variance within and across regions. No one knows what numbers and demographic characteristics of humans are sustainable, but it is clear that the prodigious stain of a billion or so chronically hungry people at present results from recent and ongoing collective human choices, not biophysical necessities. Concrete policy options to respond to demographic trends include providing universal primary and secondary education, particularly education for global and household civility; eliminating unmet needs for contraception and reproductive health; and implementing demographically sensitive urban planning, particularly construction for greater energy efficiency and friendliness to older people.
Topic:
Demographics, Development, Economics, and Environment
Political Geography:
Washington

93. Can Donors Be Flexible within Restrictive Budget Systems? Options for Innovative Financing Mechanisms

Author:
Benjamin Leo
Publication Date:
10-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper focuses on how budgetary scorekeeping systems affect governments' ability or willingness to support innovative development finance initiatives and explores several options to overcome the restrictions the systems often impose. As a starting point, it assumes that donor governments, such as the United States, will not reform their budgetary system regulations to accommodate innovative development finance commitments due to political and budget policy concerns. In general, each option outlined entails important financial, political, and bureaucratic challenges and tradeoffs. In other words, there are no silver bullets. However, there are possible approaches that may merit further exploration by donor governments that want to support specific innovative development finance initiatives but are constrained by existing budgetary systems.
Topic:
Development, Economics, and Foreign Aid
Political Geography:
United States

94. When Does Rigorous Impact Evaluation Make a Difference? The Case of the Millennium Villages

Author:
Michael Clemens and Gabriel Demombynes
Publication Date:
10-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
When is the rigorous impact evaluation of development projects a luxury, and when a necessity? We study one high-profile case: the Millennium Villages Project (MVP), an experimental and intensive package intervention to spark sustained local economic development in rural Africa. We illustrate the benefits of rigorous impact evaluation in this setting by showing that estimates of the project's effects depend heavily on the evaluation method. Comparing trends at the MVP intervention sites in Kenya, Ghana, and Nigeria to trends in the surrounding areas yields much more modest estimates of the project's effects than the before-versus-after comparisons published thus far by the MVP. Neither approach constitutes a rigorous impact evaluation of the MVP, which is impossible to perform due to weaknesses in the evaluation design of the project's initial phase. These weaknesses include the subjective choice of intervention sites, the subjective choice of comparison sites, the lack of baseline data on comparison sites, the small sample size, and the short time horizon. We describe how the next wave of the intervention could be designed to allow proper evaluation of the MVP's impact at little additional cost.
Topic:
Development, Economics, and Foreign Aid
Political Geography:
Africa and Nigeria

95. Austerity and the IMF

Author:
Kenneth Rogoff
Publication Date:
10-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
It is a great honor to present the fifth annual Richard H. Sabot lecture at the Center for Global Development. In this talk, I will take up a relatively narrow but absolutely fundamental question in the international monetary system, particularly in developing countries: Is the International Monetary fund (the IMF) guilty of bringing excessive austerity to the countries that turn to it for bailout funding? Should the IMF instead put much more weight on encouraging countercyclical fiscal policy, as it does in rich countries? Extremely difficult and complex issues underlie these seemingly straightforward questions. My modest aim in this lecture is to help clarify the issues so as to promote rational dialogue.
Topic:
Economics, International Organization, International Monetary Fund, and Foreign Aid

96. Aid for Trade: Supporting Trade Preference Reform

Author:
Susan Prowse
Publication Date:
09-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Aid-for-trade programs can help strengthen low-income countries' supply capacity and knowledge of trade preferences, which will allow them to take fuller advantage of these preferences. Aid for trade to support preference reform can be divided into three categories: (i) creation of information-sharing mechanisms to ensure that governments, SMEs and other businesses are aware of the opportunities that preferential market access offers; (ii) capacity-building support to overcome supply-side and policy constraints; and (iii) support to ease the adjustments to preference erosion that will inevitably occur. As with other aid initiatives, coordination and cohesion among assistance programs is critical for success. Delivery mechanisms such as the Enhanced Integrated Framework (EIF), the Trade Facilitation Facility (TFF), and the Standards and Trade Development Facility (STDF), are aimed at facilitating such coordination, but more could be done. And, as preference programs are intended to be temporary, aid for trade can also facilitate graduation from these programs and compensate beneficiaries for preference erosion. Unfortunately, this area is still lacking the level of innovation and financial support needed.
Topic:
Development, Economics, and Foreign Aid

97. How Can Donors Create Incentives for Results and Flexibility for Fragile States? A Proposal for IDA

Author:
Alan Gelb
Publication Date:
10-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
International Development Association (IDA) donors and others operating a country performance-based allocation system face two difficult problems: how to strengthen incentives to produce and document development results and how to increase flexibility for fragile states. Fragile states have the greatest need for projects, but their projects tend to rate poorly in performance-based allocations systems, which provide little incentive to produce successful projects in fragile states or other countries.
Topic:
Development, Economics, and Foreign Aid

98. The Arc of the Jubilee

Author:
David Roodman
Publication Date:
10-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The Jubilee 2000 movement, which called for the cancellation of the foreign debts of the poorest nations, reached its zenith in the late 1990s and 2000-and then, by design, shut down. In the space of a few years, it became one of the most successful international, nongovernmental movements in history. As part of a larger, ongoing project to understand the consequences and lessons of the episode, David Roodman provides thumbnail assessments of Jubilee 2000 from several perspectives, deemphasizing anecdotes and statistics in favor of major themes.
Topic:
Debt, Development, Economics, and Non-Governmental Organization

99. Learning about Schools in Development

Author:
Charles Kenny
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There has been considerable progress in school construction and enrollment worldwide. Paying kids to go to school can help overcome remaining demand-side barriers to enrollment. Nonetheless, the quality of education appears very poor across the developing world, limiting development impact. Thus we should measure and promote learning not schooling. Conditional cash transfers to students on the basis of attendance and scores, school choice, decentralization combined with published test results, and teacher pay based on attendance and performance may help. But learning outcomes are primarily affected by the broader environment in which students live, suggesting a learning agenda that stretches far beyond education ministries.
Topic:
Development, Economics, Education, and Poverty
Political Geography:
Afghanistan and East Asia

100. Capability Traps? The Mechanisms of Persistent Implementation Failure

Author:
Lant Pritchett, Michael Woolcock, and Matt Andrews
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Many countries remain stuck in conditions of low productivity that many call “poverty traps.” Economic growth is only one aspect of development; another key dimension of development is the expansion of the administrative capability of the state, the capability of governments to affect the course of events by implementing policies and programs. We use a variety of empirical indicators of administrative capability to show that many countries remain in “state capability traps” in which the implementation capability of the state is both severely limited and improving (if at all) only very slowly. At their current pace of progress countries like Haiti or Afghanistan or Liberia would take hundreds (if not thousands) of years to reach the capability of a country like Singapore and decades to reach even a moderate capability country like India. We explore how this can be so. That is, we do not attempt to explain why countries remain in capability traps; this would require a historical, political and social analysis uniquely applied to each country. Rather, we focus on how countries manage to engage in the domestic and international logics of “development” and yet consistently fail to acquire capability. What are the techniques of failure? Two stand out. First, 'big development' encourages progress through importing standard responses to predetermined problems. This encourages isomorphic mimicry as a technique of failure: the adoption of the forms of other functional states and organizations which camouflages a persistent lack of function. Second, an inadequate theory of developmental change reinforces a fundamental mismatch between expectations and the actual capacity of prevailing administrative systems to implement even the most routine administrative tasks. This leads to premature load bearing, in which wishful thinking about the pace of progress and unrealistic expectations about the level and rate of improvement of capability lead to stresses and demands on systems that cause capability to weaken (if not collapse). We conclude with some suggestive directions for sabotaging these techniques of failure.
Topic:
Development, Economics, and Poverty
Political Geography:
Afghanistan, India, and Liberia