Archive for the ‘Growth and development’ Category

What led colonial states to invest much more in some districts than others?

April 19, 2021

Prof Joan Ricart-Huguet of Loyola University Maryland in this article tries to answer the colonial question:

What led colonial states to invest much more in some districts than others? This study shows that natural harbors and capes led some places to become centers of pre-colonial trade. These areas, in turn, attracted the lion’s share of colonial public investments not only in infrastructure but also in health and education. Public investments were considerably lower in places further away from the centers of pre-colonial trade.


Labor Migration in Asia: Impacts of the COVID-19 Crisis and the Post-Pandemic Future

April 19, 2021

New ADB report:

This report by the Asian Development Bank Institute (ADBI), the Organisation for Economic Co-operation and Development (OECD), and the International Labour Organization (ILO) analyzes labor migration trends in Asia and puts them in the context of economic and policy developments and the changes wrought by the coronavirus disease (COVID-19) pandemic. It examines the policy settings in the major origin and destination countries of labor migrants and the medium- and long-term factors that will shape the future of labor migration in Asia. It further provides recommendations for building back better in a post-pandemic world.

The report offers up-to-date comparative statistics on labor migration, including evidence of the impacts of COVID-19 on labor migration flows and remittances. Two statistical annexes offer detailed country fact sheets and coverage of intra-Asia and cross-regional migration flows. The report also includes discussions on the future of labor migration in the aftermath of the pandemic and the role of technology and digitalization on labor mobility and its management.

This analysis partly draws on discussions that took place at the 10th ADBI-OECD-ILO Roundtable on Labor Migration: Future of Labor Migration in Asia: Challenges and Opportunities in the Next Decade, held in Bangkok, Thailand in February 2020, an annual event co-organized by ADBI, the OECD, and the ILO that brings together regional experts and policy makers. In response to the COVID-19 pandemic, the publication focuses on the pandemic’s impacts on labor mobility.


The Man Who Discovered Capitalism: A Documentary on Schumpeter for Use in the Classroom

April 9, 2021

John T. Dalton and Andrew Logan of Wake Forest University in this paper review the documentary on Schumpeter:

We describe how the 2016 documentary The Man Who Discovered Capitalism can be used in the classroom to provide an entry point to the life and economics of Joseph A. Schumpeter, whose work on innovation, entrepreneurship, and creative destruction remains relevant for students today.

We summarize the key ideas conveyed in the documentary and offer four criticisms: its failure to capture the role of fin-de-siecle Vienna on Schumpeter’s intellectual development, its incomplete understanding of Schumpeter’s theory of innovation, its overstatement of Keynes’s influence relative to Schumpeter, and the overly generous credit it gives to government for spurring innovation.

We show how the documentary can be used in the classroom, complete with sample discussion questions grounded in the criticisms we identify. We argue The Man Who Discovered Capitalism is an effective teaching tool suitable for a variety of courses, including those on economic growth, intermediate macroeconomics, and the history of economic thought, among others.

Superb. We need more such efforts of making documentaries on key economists and then build material to discuss the ideas. One good way to promote and make history of economic thought exciting!!

How high-speed rail changes the spatial distribution of economic activity: Evidence from Japan’s Shinkansen

April 8, 2021

Kazunobu Hayakawa, Hans Koster, Takatoshi Tabuchi and Jacques-François Thisse in this voxeu research:

The economic and social consequences of investments in transport infrastructure generate heated academic and policy debates because they typically involve costly investments that are supposed to yield high payoffs. Particularly telling examples of large transport infrastructure investments are investments in high-speed rail.

This column shows that the Shinkansen has had a substantial effect on Japan’s spatial distribution of employment. The relative position of municipalities within the network and their underlying location fundamentals are essential in understanding why the effects of an extensive infrastructure are positive or negative at the local level.  

Europe’s growth gap: reconciling Keynes and Schumpeter

April 7, 2021

Governor François Villeroy de Galhau of Banque De France in this speech points to growing growth gaps between Europe and US.

How to bridge the gap? Take advice of Keynes or Schumpeter?


World Development Report 2021: Data, Data and Data

March 31, 2021

World Development Report, flagship document of World Bank in out with the 2021 edition. This one focuses on Data for better lives:

Today’s unprecedented growth of data and their ubiquity in our lives are signs that the data revolution is transforming the world. And yet much of the value of data remains untapped. Data collected for one purpose have the potential to generate economic and social value in applications far beyond those originally anticipated. But many barriers stand in the way, ranging from misaligned incentives and incompatible data systems to a fundamental lack of trust. 

World Development Report 2021: Data for Better Lives explores the tremendous potential of the changing data landscape to improve the lives of poor people, while also acknowledging its potential to open back doors that can harm individuals, businesses, and societies. To address this tension between the helpful and harmful potential of data, this Report calls for a new social contract that enables the use and reuse of data to create economic and social value, ensures equitable access to that value, and fosters trust that data will not be misused in harmful ways.

Conversable Blog has a useful summary.

The Absent Voices of Development Economics (why just development, all possible streams of economics lack voices)

March 29, 2021

Arvind Subramaniam and Devesh Kapur rock the development economics boat:

Development economics focuses on improving the well-being of billions of people in low-income countries, but the Global South is severely underrepresented in the field. A small number of rich-country institutions dominate, and their growing use of randomized controlled trials in research is entrenching the imbalance.

I had written a similar sounding piece when the Nobel prize was awarded to three economists on their RCT work.

Dev eco is a privileged world:

Consider the Journal of Development Economics, a leading outlet for research papers in the field. Neither the journal’s editor nor any of its ten co-editors are based in a developing country. Just two of its 69 associate editors are, with Africa and Asia completely unrepresented.

Then there is the World Bank’s prestigious Annual Bank Conference on Development Economics (ABCDE). The 2019 event celebrated the 75th anniversary of the Bretton Woods conference that established the World Bank and the International Monetary Fund, but none of the 77 participants were from an institution located in a developing country. And our analysis of the ABCDE’s three-decade history shows that just 7% of those authoring conference papers have been from developing-world institutions.

The surge and sheer dominance of RCT:

The long-standing problem of underrepresentation is being amplified by the growing use of randomized controlled trials (RCTs) to test the effectiveness of specific poverty-reduction interventions in low-income countries. Although the RCT movement deserves immense credit for highlighting the need for evidentiary rigor in development economics, it has had exclusionary consequences.

By virtue of their well-deserved academic reputations, RCT-oriented economists now work at the world’s most prestigious universities and research institutions and serve on the editorial boards of top economics journals. This crucial gatekeeping role gives them agenda-setting power. Two decades ago, for example, there were virtually no RCT-based papers in development economics; in 2020, according to our analysis, they accounted for about 40% of the articles in the leading journals.

Moreover, conducting RCTs is expensive, which means that poverty-reduction research – and funding for it – is increasingly concentrated in the richest universities (J-PAL was established at MIT).

Indeed, the cost of carrying out RCTs can run into millions of dollars per paper, making it difficult for developing-country researchers to study their own countries without genuflecting to wealthy institutions’ academic orthodoxies. If these researchers cannot do RCT-based studies, they have little chance of getting published in leading journals, and risk being consigned to second-class status. Even on a generous interpretation of authorship, our analysis suggests that developing-country institutions accounted for less than 10% of RCT-based papers in the top six economics journals in 2020.

How does one ignore China and Chinese economists in dev eco?

The final cost relates to the type of knowledge that is ignored. Several highly successful economies – including South Korea, Taiwan, China, Vietnam, Mauritius, and Botswana – did not rely on RCTs to change their destinies and lift their large populations out of poverty. Yet, academics from these countries generally do not sit on the editorial boards of major journals or participate prominently in development economists’ conferences and seminars – an omission that is particularly telling in the case of China, with its historically unprecedented economic transformation. It is as if these countries’ development successes have no lessons to offer.

In the end, an example from literature:

We also must heed the novelist Kazuo Ishiguro’s 2017 Nobel lecture, in which he urged a broadening of “our common literary world to include many more voices from beyond our comfort zones of the elite first-world cultures.” That means searching “more energetically to discover the gems from what remain today unknown literary cultures, whether the writers live in far-away countries or within our own communities,” while taking “great care not to set too narrowly or conservatively our definitions of what constitutes good literature.”

Substitute “development economics” for “literature,” and Ishiguro’s injunction yields a constructive agenda of corrective action for intellectuals in the Global North. It also suggests that diversity and broader representation are the best safeguards against intellectual narrowness resulting from elite capture.

Not just replace development economics for literature but entire economics actually. The sheer neglect of economics faculties outside of few Universities is quite telling. One could look at all other journals and see whether voices from Asia/Africa are being represented. Most economics departments lack diversity of all possible types. They all look the same and ask same types of questions.

Prof Sabyasachi Kar in this Twitter thread simply asking the second/third world country economists to join hands with first world will not change anything much. As the former basically copy latter! So you will more of the same.

What is needed is change of incentives where some importance is given to local knowledge. This is so true. All the economics departments just look the same with same kinds of incentives systems.

One other way to address this could be to encourage textbooks of authors from all kinds of countries. After all as Samuelson said “I don’t care who writes a nation’s laws…if I can write its textbooks.”


The Political Economy of Inclusive Growth: A Review

March 26, 2021

New IMF paper by Barbara Dutzler, Simon Johnson and Priscilla S Muthoora:

In this paper, we review the role of the political economy in inclusive growth. We find that political economy forces on the demand and supply side have weakened redistribution over time and contributed to a new wave of populism. We document growing support for a rethink of the social contract to make growth more inclusive and discuss some of its broad elements.

Lessons from 50 years of Bangladesh Independence: Development could succeed anywhere?

March 26, 2021

2021 is quite an anniversary year.

26 March 2021 marks 50 years of independence of Bangladesh. (in pictures)

Bangladesh economy has been quite a story. See this Bank of Bangladesh publication celebrating 40 years (issued in 2011).

Kissinger had dubbed Bdesh as bottomless basket case dependednt on foreign aid.

In 1976, Just Faaland and Jack R. Parkinson had written a book titled: Bangladesh. The Test Case for Development. They famously said: “If development could be made successful in Bangladesh, there can be little doubt that it could be made to succeed anywhere else. It is in this sense that Bangladesh is the test case for development.”

Akbar Ali Khan reviewed the Faland and Robinson hypothesis in 2013:


Why Germany’s Social Market Economy Succeeds?

March 16, 2021
Lars P. Feld, Peter Jungen and Ludger Schuknecht in this Project Syndicate piece:

Since World War II, Germany has served as Europe’s economic anchor and managed to weather global and regional storms better than most other countries. The reason is not that it has been lucky, but that it has remained committed to a tried-and-tested policymaking approach anchored in classical economics.

Water Infrastructure and Health in U.S. Cities

March 15, 2021

Brian Beach of Vanderbilt University in this NBER paper:

Drought relief by state governments: Evidence from South India

March 10, 2021

Lisa Tarquinio of Boston Univ in this IdeasforIndia piece:

In developing countries, extreme climate events can have disastrous consequences for vulnerable populations. This article analyses state government’s responses to droughts in South India during 2008-2019, and shows that the allocation of relief by state governments is not solely driven by the goal of aiding the drought-affected. It also demonstrates that drought relief – if appropriately targetted – is associated with improved agricultural production.

The Erroneous Foundations of Law and Economics

March 9, 2021

Law & Economics (L&E) is a central theory of conservative legal scholars. Beginning in the 1970s, it has had a profound impact on American jurisprudence. L&E is taught in virtually every leading law school. A large portion of the federal judiciary has received training in L&E. Although L&E has received some criticism from law school faculty, including from many in the Critical Legal Studies movement and from specialists in moral philosophy, few if any, legal scholars have challenged the aspects of the “economics” imported by L&E.

The fundamental core principle of L&E is that legal decisions should be based on economic “efficiency.” In our new INET Working Paper, we show that L&E advocates do not define efficiency in the way agreed to by most economists, as Pareto Efficiency. This is because Pareto Efficiency requires that policy changes not have “losers,” while legal decisions always have “winners” and “losers.” Instead, as we explain, L&E defines efficiency as either potential Pareto Efficiency (also known as Kaldor and/or Hicks Efficiency), or as Total Surplus, often problematically labeled by L&E writers as “Wealth Maximization.” Our paper shows that these alternatives lack logical consistency unless quite unrealistic assumptions are made. As a consequence, we argue that L&E lacks any scientific basis.

How Bahamas, Sri Lanka, and Uganda fight the pandemic’s disruption with technological innovation

March 5, 2021

Steven Dorst in this IMF article reflects on lessons from three countries:

Never let a serious crisis go to waste.” Innovators around the world are taking the saying seriously, responding to the disruption caused by the COVID-19 pandemic with creative digital solutions.

The initiatives we highlight here are markedly diverse: the overnight transformation of Sri Lanka’s 125-year-old live tea auction; the world’s first central bank digital currency in The Bahamas; and the rapid pivot from a taxi-hailing app in Kampala, Uganda, to a thriving e-commerce platform.

All three share a common characteristic: an innovative, entrepreneurial spirit born of an urgent need. The Bahamas initiative responded to a need to extend financial services to residents of remote islands whose lack of access was exacerbated by extreme weather. In Sri Lanka, the tea industry—fundamental to the economy and employing millions—came to a sudden halt when COVID-19 prohibited the weekly tea auction from convening. And in Uganda, people’s ability to get food and medicine and earn an income was severely hampered by the pandemic lockdown.

While the ingredients for success vary in each country, there is one constant: there was an enabling environment for these initiatives to germinate and quickly become reality. The end result? Innovative, homegrown initiatives that help millions of underserved people be financially included and have a better shot at prosperity.

The tale of the three stabilities: price stability, financial stability and economic stability

March 4, 2021

Governor François Villeroy de Galhau of Banque De France in this speech:


Why U.S. Immigration Matters for the Global Advancement of Science

March 2, 2021

Ruchir Agarwal, Ina Ganguli, Patrick Gaulé and Geoff Smith in this new IMF WP:

This paper studies the impact of U.S. immigration barriers on global knowledge production. We present four key findings. First, among Nobel Prize winners and Fields Medalists, migrants to the U.S. play a central role in the global knowledge network—representing 20-33% of the frontier knowledge producers. Second, using novel survey data and hand-curated life-histories of International Math Olympiad (IMO) medalists, we show that migrants to the U.S. are up to six times more productive than migrants to other countries—even after accounting for talent during one’s teenage years. Third, financing costs are a key factor preventing foreign talent from migrating abroad to pursue their dream careers, particularly for talent from developing countries. Fourth, certain ‘push’ incentives that reduce immigration barriers—by addressing financing constraints for top foreign talent—could increase the global scientific output of future cohorts by 42 percent. We concludeby discussing policy options for the U.S. and the global scientific community.

The (de-)central question: Subnational governments and the making of development in Africa

February 25, 2021

Robots and employment: Evidence from Japan, 1978-2017

February 11, 2021

Daisuke Adachi, Daiji Kawaguchi and Yukiko Saito in this voxeu research:

This Decade’s Growth Champions

February 3, 2021

Kaushik Basu in this Proj Synd piece picks growth champions in the decade of 2021-30:

Which countries will be the big economic success stories of the next ten years? South Korea is a safe pick, while Vietnam and Mexico also are poised to prosper, whereas India’s divisive politics put that country out of the running for the time being.

What 31 provinces reveal about growth in China?

February 1, 2021

Eeva Kerola and Benoit Mojon in this BIS working paper look at Chinese growth story based on its provinces:

It is important to understand the growth process under way in China. However, analyses of Chinese growth became increasingly more difficult after the real GDP doubling target was announced in 2012 and the official real GDP statistics lost their fluctuations. With a dataset covering 31 Chinese provinces from two decades, we have substantially more variation to work with. We find robust evidence that the richness of the provincial data provides information relevant to understand and project Chinese aggregates. Using this provincial data, we build an alternative indicator for Chinese growth that is able to reveal fluctuations not present in the official statistical series. Additionally, we concentrate on the determinants of Chinese growth and show how the drivers have gone through a substantial change over time both across economic variables and provinces. We introduce a method to understand the changing nature of Chinese growth that can be updated regularly using principal components derived from the provincial data.

Our alternative growth indicator can reveal fluctuations not present in the official statistical series. Looking at the determinants of growth, we find that before 2010 Chinese growth was more dependent on productivity, urban employment and investment. After 2010, however, growth has been increasingly supported by government expenditure and credit. These new growth determinants now also apply more uniformly to a larger group of Chinese provinces.


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