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  • Author: William Savedoff, Victoria Fan
  • Publication Date: 03-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Almost every country exhibits two important health financing trends: health spending per person rises and the share of out-of-pocket spending on health services declines. We describe these trends as a "health financing transition" to provide a conceptual framework for understanding health markets and public policy. Using data over 1995-2009 from 126 countries, we examine the various explanations for changes in health spending and its composition with regressions in levels and first differences. We estimate that the income elasticity of health spending is about 0.7, consistent with recent comparable studies. Our analysis also shows a significant trend in health spending - rising about 1 percent annually - which is associated with a combination of changing technology and medical practices, cost pressures and institutions that finance and manage healthcare. The out-of-pocket share of total health spending is not related to income, but is influenced by a country's capacity to raise general revenues. These results support the existence of a health financing transition and characterize how public policy influences these trends.
  • Topic: Development, Economics, Health, Governance
  • Political Geography: United States
  • Author: Juan Camilo Castillo, Daniel Mejia, Pascual Restrepo
  • Publication Date: 02-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Using the case of the cocaine trade in Mexico as a relevant and salient example, this paper shows that scarcity leads to violence in markets without third party enforcement. We construct a model in which supply shortages increase total revenue when demand is inelastic. If property rights over revenues are not well defined because of the lack of reliable third party enforcement, the incentives to prey on others and avoid predation by exercising violence increase with scarcity, thus increasing violence. We test our model and the proposed channel using data for the cocaine trade in Mexico. We found that exogenous supply shocks originated in changes in the amount of cocaine seized in Colombia (Mexico's main cocaine supplier) create scarcity and increase drug-related violence in Mexico.
  • Topic: Crime, War on Drugs, Narcotics Trafficking
  • Political Geography: Colombia, Mexico
  • Author: Michael Clemens
  • Publication Date: 05-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Skilled workers have a rising tendency to emigrate from developing countries, raising fears that their departure harms the poor. To mitigate such harm, researchers have proposed a variety of policies designed to tax or restrict high-skill migration. Those policies have been justified as Pigovian regulations to raise efficiency by internalizing externalities, and as non-Pigovian regulations grounded in equity or ethics. This paper challenges both sets of justifications, arguing that Pigovian regulations on skilled emigration are inefficient and non-Pigovian regulations are inequitable and unethical. It concludes by discussing a different class of policy intervention that, in contrast, has the potential to raise welfare.
  • Topic: Economics, Human Rights, Human Welfare, Immigration, Monetary Policy
  • Political Geography: India
  • Author: Liliana Rojas-Suarez, Maria Alejandra Amado
  • Publication Date: 05-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper analyzes Latin America's Financial Inclusion Gap, the difference between the average financial inclusion for Latin America and the corresponding average for a set of comparator countries. At the country level, we assess four types of obstacles to financial inclusion: macroeconomic weaknesses, income inequality, institutional deficiencies and financial sector inefficiencies. A key finding of this paper is that although the four types of obstacles explain the absolute level of financial inclusion, institutional deficiencies and income inequality are the most important obstacles behind the Latin America's financial inclusion gap. From our analysis at the individual level, we find that there is a Latin America-specific effect of education and income. The results suggest that the effect of attaining secondary education on the probability of being financially included is significantly higher in Latin America than in its comparators. Furthermore, the difference in the probability of being financially included between the richest and the poorest individuals is significantly higher in Latin America than in comparator countries.
  • Topic: Economics, Education, Human Rights, Poverty
  • Political Geography: Latin America
  • Author: Alan Gelb, Anton Dobronogov, Fernando Brant Saldanha
  • Publication Date: 07-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. This paper considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance. The paper develops some ideas on how a donor like the International Development Association might structure its program of financial transfers to mitigate volatility. The paper outlines ways in which the International Development Association could use hedging instruments to vary disbursements while still working within a framework of country allocations that are not contingent on oil prices. Simulations suggest that the International Development Association could be structured to provide a larger degree of insurance if it is calibrated to hedge against large declines in resource prices. These suggestions are intended to complement other mechanisms, including self-insurance using Sovereign Wealth Funds (where possible) and the facilities of the International Monetary Fund.
  • Topic: Economics, International Trade and Finance, Natural Resources, Foreign Aid
  • Political Geography: Uganda, Kenya, Tanzania, Ghana
  • Author: Amanda Glassman, Justin Sandefur
  • Publication Date: 07-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Across multiple African countries, discrepancies between administrative data and independent household surveys suggest official statistics systematically exaggerate development progress. We provide evidence for two distinct explanations of these discrepancies. First, governments misreport to foreign donors, as in the case of a results-based aid program rewarding reported vaccination rates. Second, national governments are themselves misled by frontline service providers, as in the case of primary education, where official enrollment numbers diverged from survey estimates after funding shifted from user fees to per pupil government grants. Both syndromes highlight the need for incentive compatibility between data systems and funding rules.
  • Topic: Development, Foreign Aid, Foreign Direct Investment, Governance, Developing World
  • Political Geography: Africa
  • Author: Andy Sumner, Sergio Tezanos Vázquez
  • Publication Date: 08-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Many existing classifications of developing countries are dominated by income per capita (such as the World Bank's low, middle, and high income thresholds), thus neglecting the multidimensionality of the concept of 'development'. Even those deemed to be the main 'alternatives' to the income-based classification have income per capita heavily weighted within a composite indicator. This paper provides an alternative perspective: clusters of developing countries. We take 4 'frames' on the meaning of development: economic development, human development, better governance, and environmental sustainability. We then use a cluster procedure in order to build groups of countries that are to some extent internally 'homogeneous', but noticeably dissimilar to other groups. The advantage of this procedure is that it allows us identify the key development characteristics of each cluster of countries and where each country fits best. We then use this taxonomy to analyze how the developing world has changed since the late 1990s in terms of clusters of countries and the country groupings themselves.
  • Topic: Development, Economics, Governance, Reform
  • Author: Paul Novosad, Eric Werker
  • Publication Date: 09-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: National governments frequently pull strings to get their citizens appointed to senior positions in international institutions. We examine, over a 60 year period, the nationalities of the most senior positions in the United Nations Secretariat, ostensibly the world's most representative international institution. The results indicate which nations are successful in this zero-sum game, and what national characteristics correlate with power in international institutions. The most overrepresented countries are small, rich democracies like the Nordic countries. Statistically, democracy, investment in diplomacy, and economic/military power are predictors of senior positions, even after controlling for the U.N. staffing mandate of competence and integrity. National control over the United Nations is remarkably sticky; however the in influence of the United States has diminished as US ideology has shifted away from its early allies. In spite of the decline in US influence, the Secretariat remains pro-American relative to the world at large.
  • Topic: Demographics, International Cooperation, International Organization
  • Political Geography: United States
  • Author: Marigold Norman, Smita Nakhooda
  • Publication Date: 09-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper presents a thorough synthesis of available data to illuminate the current global state of finance for reducing emissions from deforestation and degradation (REDD+). It adds to a growing body of work that seeks to understand the size and composition of finance for REDD+ initiatives, as well as the delivery of climate finance more generally. The analysis shows that aggregate pledges of both public and private finance are significant, at more than US $8.7 billion for the period between 2006 and March 2014, but the pace of new pledges slowed after 2010. The public sector contributes nearly 90% of reported REDD+ finance, with the preponderance of funding concentrated among a relatively small number of donors and recipient countries. The paper analyzes early experience with performance-based finance, although such finance represents less than two-fifths of pledges to date. The extent to which new institutions in the climate finance architecture such as the Green Climate Fund will provide a new and effective channel for increasing support for REDD+ remains to be seen.
  • Topic: Economics, Environment, International Cooperation, Politics
  • Author: Dean Karlan, Bram Thuysbaert, Christopher Udry, Lori Beaman
  • Publication Date: 09-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self-select into lending programs.
  • Topic: Agriculture, Economics
  • Political Geography: Africa