Bill Easterly, writing on the “anarchy of success” in the New York Review of Books, isn’t very fond of the policy recommendations in Ha-Joon Chang’s Bad Samaritans. As the book has been out for nearly two years, I suspect that his criticisms won’t deter many sales. Easterly’s bottom line is that “third-world growth seems to have been fairly expert-proof.”
Archive for the ‘Development’ Category
Easterly on Chang
Saturday, September 19th, 2009
Against aggregative theories of growth
Monday, September 14th, 2009Abhijit Banerjee and Esther Duflo make the case against aggregative theories of economic growth:
The premise of the aggregative approach to growth was that markets function well enough within countries that we can largely ignore the fact that there is inefficiency and unequal access to resources within an economy when we are interested in dynamics at the country level. The evidence suggests that this is not true: The cross-country differences in marginal products or technology that we want to explain are of the same order of magnitude as the differences we observe within each economy. A theory of cross-country differences has to based on an understanding and an acknowledgment of the reasons why rates of returns vary so much within each country.
A randomized experiment with firms
Tuesday, September 8th, 2009We’re used to seeing randomized controlled trials in education, finance, and health interventions. Nick Bloom and his co-authors have performed a randomized experiment on firms. They selected 16 garment firms in India and provided the 8 treatment firms with extensive management consulting by Accenture and 8 control firms with very light consulting. The preliminary evidence from a pilot program shows lots of room for management improvement.
The case for preferential trade with Africa
Monday, August 31st, 2009Karol Boudreaux criticizes Jendayi Frazer for advocating preferential trade with Africa. She writes:
I’m only going to discuss one of her recommendations, which is this: do not extend AGOA trade preferences to a small subset of developing nations that includes some south Asian and some Islamic nations. Ms. Frazer argues: “extending the same trade preferences to hypercompetitive Cambodia and Bangladesh—each of which individually exports more apparel to the U.S. than all of sub-Saharan Africa combined—will undermine the program’s success in Africa.” Here’s a link to the proposed legislation that would expand the trade bill — it’s currently in committee.
But note that the success Ms. Frazer identifies is based on playing favorites. Maybe African producers should be favored over Bangladeshi producers, but on what grounds? A different version of this question would be: “why should African manufacturers be shielded from competition from other developing world producers?”
Boudreaux condemns such preferences as “favoritism” and “protectionism” and argues that more liberal, open trade (combined with better governance) offers the best path for African growth and development. Perhaps. But shouldn’t Boudreaux at least address the respectable economic arguments underpinning the idea that African economies need a foothold to establish nascent industries? Paul Collier and Tony Venables have argued the case for AGOA on such grounds, both in a VoxEU column and in an article in The World Economy.
Africa has lagged behind partly because its economic reforms lagged those of Asia. When export diversification started to boom in Asia in the 1980s, no mainland African country provided a comparable investment climate. Now a number of African cities — Accra, Dakar, Mombassa, Maputo and Dar-es-Salaam, etc. – offer reasonable investment climates, but they cannot compete with Asian cities that have comparable investment climates since the Asian cities have established clusters of firms in the new export sectors. Such clusters provide firms in the cluster with the advantages of shared knowledge, availability of specialist inputs and a developing pool of experienced labour. A classic chicken-and-the-egg problem.
Until African cities can establish such clusters, firms located in Africa face costs that will be above those of Asian competitors, but because costs are currently higher individual firms have no incentive to relocate. If Africa is to diversify its exports and create employment it must develop such efficient clusters of modern sector activity. Where it is feasible, this offers a more reliable development path than the commodity extraction model which Africa has followed to date.
Trade preferences offer a potential solution to the chicken-and-the-egg problem
Boudreaux may be right about the value of trade preferences, but her blog post solely discusses static comparative advantage and competitiveness, whereas industrialization and development is also about dynamic comparative advantage and export diversification.
If you’d like to learn more, the UN isn’t going to help you
Tuesday, July 21st, 2009The United Nations’ The Millennium Development Goals Report 2009 doesn’t have any footnotes, which makes it almost worthless. For example, they write: “Worldwide, the number of people living in extreme poverty in 2009 is expected to be 55 million to 90 million higher than anticipated before the global economic crisis.”
That’s a headline-worthy number. It’d be nice to see their calculations. Or at least identify who produced the number. Was it the UN or someone else?
A UN press release from 24 June 2009 says “The crisis-related slowdown in growth in developing countries implied there were an estimated 55 to 90 million more extremely poor people in 2009 living on less than $1.25 a day, than had been projected before the crisis.” This contrasts with numbers produced by World Bank researchers Shaohua Chen and Martin Ravallion in late April, who estimated that
the crisis will add 53 million people to the 2009 count of the number of people living below $1.25 a day and 64 million to the count of the number of people living under $2 a day. Given current growth projections for 2010, there will be a further impact on poverty in that year, with the cumulative impacts rising to an extra 73 million people living under $1.25 a day and 91 million more under $2 a day by 2010.
So did we learn during May and June that an additional 37 million persons were likely to fall below the $1.25 per day poverty line? Did Chen and Ravallion revise their updates recently, or does the UN source disagree with their estimates? We’ll never know, because the MDG Report doesn’t have footnotes or references. But at least it has photo credits!
What does USAID stand for?
Saturday, June 13th, 2009Lant Pritchett says that promoting development and providing assistance to developing countries are not the same thing:
An existential question the next leader of USAID has to face is whether USAID is about assistance—in whatever forms and for whatever goals political support can be mobilized and logistics can be arranged—or whether it really is an agency whose mission is to promote development…
Development, for better or worse, has always been defined as a deliberate acceleration of modernization, conceived as a synchronized (if not simultaneous), complex, four-fold transition of economy, polity, administration, and society…
Even addressing a series of important problems for well-being like vaccinations, schools for girls, HIV/AIDS prevention or malaria does not add up to a development agenda. If the next leader of USAID does not own that objective and mission—putting the big “D” in USAID and not just little “a” in aid—he or she is sealing USAID’s irrelevance.
Paul Romer on Hong Kong as a development strategy
Wednesday, May 20th, 2009Paul Romer wants to replicate the Hong Kong experiment by having developing countries cede cities to be managed by developed countries such as Canada or Finland. The advantages of this approach relative to special economic zones are not totally obvious to me.
Acemoglu, Johnson, and Robinson (2001) according to Tim Harford
Friday, April 17th, 2009In a review of Economic Gangsters, Tim Harford dedicates four paragraphs to describing AJR’s “The Colonial Origins of Comparative Development: An Empirical Investigation” (AER, 2001). An objection and a compliment:
- Harford uses language like “Acemoglu’s study” and “Acemoglu observes.” But he’s not describing Acemoglu’s large body of work; he’s just talking about one particular paper coauthored with two other economists. Such presentation of the research is rather unfair to Simon Johnson and James Robinson.
- Instrumental variables are quite difficult to explain to non-economist audiences, but I think that Harford’s summary does a good job of communicating that colonial history is an instrument rather than “the root of the variance in income levels around the world” (though AJR’s paper itself may blur that distinction). His narrative emphasises that institutions shape economic growth and appropriately confines the discussion of settler mortality to its effect on institutions.
Food prices still 60% higher than 18 months ago
Tuesday, April 7th, 2009The FT says that the food crisis isn’t over.
Interviews with Zimbabweans trading gold for bread
Sunday, April 5th, 2009This video from February documents how Zimbabweans turned to digging up gold from rivers once shops no longer accepted the government’s currency. A tin of grain cost .1 grams of gold (approximately $3). Inflation has begun to subside as Zimbabwe’s government now allows shops to quote prices in foreign currencies, notably the US dollar.
