Archive for the ‘Growth and development’ Category

How Brazil is using music therapy to alleviate poverty?

February 19, 2015

World Bank points to this:

It seems unlikely, but promoting the arts can actually help lift young people out of poverty. Some of Brazil’s poorest communities are using a rural development fund to provide cultural activities for their youth. Young people say playing music keeps them from the streets, teaches them new skills and gives them an opportunity to make friends. Take On what you want to change to end extreme poverty.
Check the short video on the webpage..


Do the Scandinavians really have it all figured out?

February 12, 2015

Interesting article on the Scandinavian way of life.

It is written by this American author Nathan Heller who compares these two styles:


Unintended consequences of malaria bed nets — used as fishing nets

February 11, 2015

Gulzar points to this interesting article on unintended consequences, something which econs love to ignore.

So what is the story here?


The productivity of trust between state and private firms

December 26, 2014

Ricardo Hausmann has a nice article on the topic. There is always this uneasy relationship between big businesses and government.

Both believe that they are distant from each other which is just that – a belief:


Why rapid growth is a strong predictor of future slowdowns?

December 11, 2014

An interesting piece by Larry Summers and Lant Pritchett (detailed paper here).

They say low growth after high growth is just a mean reversion. There is no reason why high growth shall continue forever. This is a harsh reality countries have to face and accept:


Economic development and the effectiveness of foreign aid: A historical perspective

November 28, 2014

Sebastian Edwards of UCLA updates the evidence on one of the controversial topics on development  — Does foreign aid work?

He says there are three schools of thought:


Living in two Colombias (just like two Indias, two US..)

November 27, 2014

How most countries have become divided into two halves — one the prospering and the other decaying (in some cases ever decaying).

Andres Velasco writes of two such Colombias:


Is Thanksgiving just a lesson on free markets?

November 27, 2014

Richard Maybury of Mises Institute has this really interesting article. I have no idea really on why thanksgiving day is celebrated. 

So Maybury explains why it is celebrated and why much of the traditional wisdom is plain myth. The real story is vastly different:


Why both Keyensian and Free market economic schools are wrong…

November 26, 2014

Jess Sachs says recent crisis has exposed both these dominant schools of thought (just read on..he actually advocates planning!!):


Africa’s Failure to Industrialize: Bad Luck or Bad Policy?

November 25, 2014

Brookings has released a series of papers on industrial experiences in Africa.

John Page summarises the findings:


Stop trying to save the world…why we should “dream smaller” in economic development?

November 19, 2014

Michael Hobbes, a long time development practitioner has written this really useful piece on economic development (HT: MR Blog).

In a longish piece he points how development world gets crazy about an idea and then oversells it to rest of the world. So we keep seeing fads come and go with overall development remaining unchanged. What is worse is that just because we see some positive result in a really small experiment in a small place, the experts sell it as the solution. The hype is built up for some years only to see plenty of dollars wasted and no progress.

The idea is not to shun these dev programs. But just have much smaller targets (dreams) and be really humble over its claims. Starts with this interesting example of Playpump:


50 years of Solow growth model…implications and impact

November 17, 2014

A nice interview of Prof. Robert Solow in McKinsey Quarterly (MQ). The interview celebrates 50 years of both the model and MQ.

The best thing about the interview is that it discusses how Solow model was actually applied to the real industries. What is Solow model? Well it says what matters for growth is not labor or capital but technology. What did the actual evidence show?

The Quarterly: What, if anything, surprised you about the findings of the early MGI studies?

Robert Solow: What came as something completely new to me was that if you looked at the same industry across countries, there were almost always dramatic differences in either labor productivity or total factor productivity. To my surprise, it turned out that most of the time, certainly more often than not, the difference in productivity—in the auto industry or the steel industry or the residential-construction industry in the US and in countries in Europe—was not only substantial but couldn’t seriously be explained by differences in access to technology.

We also found that the productivity differences could not be traced to differences in access to investment capital. The French automobile industry, much to my surprise, turned out to be more capital intensive than the American automobile industry. So it was not that either. The MGI studies instead traced these differences in productivity to organizational differences, to the way tasks were allocated within a firm or a division—essentially, to failures in managerial decisions.

I was, of course, instantly suspicious of this. I figured to myself, “What do you expect a bunch of management consultants to find but differences in management capacities? That’s in their genes. That’s not in my genes.” But MGI made a very convincing case for this. And I came to believe that it was right.

:-) Gave some legitimacy to the consulting industry..

What drove management? Competition..

The Quarterly: So management was the primary factor in productivity differences?

Robert Solow: Yes, and there was another surprise, for which there was partly anecdotal, partly statistical evidence. If you asked why there were differences that could be erased or diminished by better management, the answer was that it took the spur of sharp competition to induce managers to do what they were in principle capable of doing. So the idea that everybody is everywhere and always maximizing profits turned out to be not quite right.

MGI made a very good case that what was lacking in these trailing industries in other countries—or in the US, in cases where the US trailed—was enough exposure to competition from whoever in the world had the best practice. And this, of course, can apply within a country. We know that in any industry, there is a whole distribution of productivity levels across firms and even, sometimes, across establishments within a firm. And much of that must be due to the absence of any spur to do more.

So an interesting conclusion to me was that international trade serves a purpose beyond exploiting comparative advantage. It exposes high-level managers in various countries to a little fright. And fright turns out to be an important motivation.

The Quarterly: So competing against the global best-practice leaders is a way to encourage your own industry to use best practice?

Robert Solow: Yes, and it goes beyond that, even. Competing as part of the world economy is an important way of gaining access to scale. If you’re a Belgian company or even a French company, it may be that best practice requires a scale of production larger than the French domestic market will provide for French producers.

So it’s important for such companies to have access to the international market. That was not something I had thought of. And I don’t think anyone had—at least I had no reason to think, within economics, that there had been much thought about management activities as a big difference between best practice and less good practice. We had always thought, “Well, people seek profits. And if they seek profits, they’ll have to adopt best practice.” Not so.

He says the future research shd look at productivity in services sector:

The Quarterly: Looking toward the future, are there other issues in economics that MGI’s sector-level approach might be helpful for?

Robert Solow: I would like to see more work on the determinants of productivity and productivity increases within the service sector. To begin with, I don’t think we even have a very clear idea about the relative capital intensity within the service sector or between the service sector and goods-producing sector.

I remember I was once writing something in which I was describing the service sector as being of relatively low capital intensity. And then I stopped and remembered that the following day I had an appointment with my dentist and that my dentist’s office was as capital intensive a 500 square feet as I had ever seen in my life.

So I think the place where the MGI approach is most needed right now is in the service sector. There has been service-sector work within MGI, and outside of it as well, but not as much as is warranted in view of the 70 percent or more of all employment in advanced economies that’s in service industries.

The Quarterly: Are there particular places in the service sector where you’d look first?

Robert Solow: Well, that brings me to another MGI result that I found fascinating. At one point, we were trying to understand the industrial basis, the sectoral basis, for the acceleration and deceleration of productivity growth. And one of the things we found was that the two largest sectoral contributions to the acceleration of productivity growth when it was accelerating and, presumably, to the deceleration when it was decelerating came from wholesaling and retailing.1 Both of them, at the time, were low-productivity sectors and low-productivity-growth sectors. But they employ so many people that a slight improvement in the productivity of retailing makes a large contribution to the increase in national productivity.

There has been some work on that, but I think the work is needed now more in personal services. God knows, in healthcare. And education. Or child care. All sorts of things.

Nice bit..Calls himself an ordinary macroeconomist…hope most of us really ordinary economists also believe the same..


How Pakistan created its Unique identity system?

November 13, 2014

I was completely unaware of this thing called NADRA Card (National Database and Registration Authority) which serves as an identity card for Pakistan people.

This speech by Tariq Malik, former chairman, National Database and Registration Authority is quite a fascinating one. He explains how this idea of unique identity for Pakistan people came about and was then implemented in a vigorous fashion. There are not many poisitive stories from Pakistan but this one looks like quite a successful one. How the identity card eventually got integrated with all kinds of services and also helped in conducting a transparent election in 2013 is quite a story.

There are questions raised on this identity system but the speech is much more than that. It also explains how one goes around developing a good public organisation in countries like Pakistan.

Even more interesting is how NADRA is now doing similar/related projects in other countries as well. So, the quality of work is accepted at an international level as well.


Is Your Impact Evaluation Asking Questions That Matter? A Four Part Smell Test

November 13, 2014

Prof Lant Pritchett gives his 4 smell tests to figure whether impact evaluators are asking the right questions..


‘Children of the Wall’: Outcomes for kids born in a crisis

November 11, 2014

Timely piece by Arnaud Chevalier and Olivier Marie. Anything on Berlin Wall is likely to be read at this hour.

In this article, authirs show how children born during the fall are facing several issues:

Children born in crises face different initial conditions. Data on children born in East Germany just after the Berlin Wall came down confirms that this corresponds to worse adult outcomes. ‘Children of the Wall’ have 40% higher arrest rates, are 33% more likely to have repeated a grade by age 12, and are 9% more likely to have been put into a lower educational track. This column argues that these negative outcomes can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

The authors get hold of a survey to tease these relationships:

To explore if these negative outcomes are driven by negative parental characteristics, we make use of very detailed survey data from the German Socio Economic Panel (SOEP) and the Deutsches JungedInstitut survey (DJI). Women who gave birth in East Germany just after the end of the communist regime were on average younger, less educated, less likely to be in a relationship, and less economically active.

Importantly, they also provided less educational input to their children even if they were not poorer. The Children of the Wall also rated their relationships with their mothers and the quality of parental support they received by age 17 much less favourably than their peers. Both these children and their mothers were also far more risky individuals compared with individuals who did not give birth (or were not born) in East Germany between August 1990 and December 1993.

While these results are in line with negative parental selection, they could also be driven by timing-of-birth effects. Due to the economic turmoil prevalent at the time, these children may have experienced higher levels of maternal stress in utero and during early childhood, which may have shaped their future behaviour.

To assess this hypothesis, we examine the same set of outcomes for the older siblings of the Children of the Wall who were born in the non-uncertain times of East German communism. They also similarly report having a poor relationship with their mothers, lower educational attainment, and are more risk-taking individuals. We thus reject the possibility that the Children of the Wall have worse outcomes due to being born in ‘bad times’ and instead conclude that the negative outcomes observed for this cohort can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

A possible reason for this negative parental selection is that the fertility decision of these women did not react as strongly to changes in the economic environment. Indeed, further analysis of the SOEP reveals that less educated mothers were far less likely than more educated ones to reduce their fertility when they perceived a bad economic environment.

:-) Importance of parenting..

Economics of inclusion..

November 10, 2014

Prof Hausmann again. This time he writes on how we can make inclusive growth count.

The central idea is to get the basic infra going:


25th anniversary of fall of Berlin Wall: How have countries that broke from USSR faring?

November 5, 2014

A superb post by Branko Milanovic, an inequality expert who worked at World Bank (his blog on inequality is really good and promising).

He looks at how these countries are faring and data shows nothing much has happened. The hyped convergence to west has been an illusion for most. Only in case of Poland has some kind of development and convergence happened:


Home prices since 1870 and why Ricardo seems to have been right..

November 3, 2014

Katharina Knoll, Moritz Schularick and Thomas Steger look at home prices since 1870 in 14 countries.

They show how home prices have risen mostly in the second half of 20th century:


Book Review — The Gifts of Athena: Historical Origins of the Knowledge Economy

October 31, 2014

What a book by Prof Joel Mokyr of Northwestern Univ. It is a pity that this book is highly recommended for reading even to economics students.

This book says industrial revolution basically happened as there was certain knowledge creation which allowed the revolution to happen. The book is around this process of knowledge creation. How small things added up over a period of time which led to the so called revolution. These small things were added to a super set called Omega (Ω) and how they were applied becomes lambda (λ). The entire book explains how this Omega expanded overtime and then with easier access became part of lambda. Easier access to these technologies made a huge change from the previous episodes where the activity started but could not become a revolution. There was far more investment and application towards sharing and making the knowledge of Omega and Lambda to others.


Brazil is Belindia – Belgium + India

October 31, 2014

Andres Velasco reflects on the recent Brazil elections. I mean how quickly things turn around. Just three years back, people were praising the outgoing President Lula who had left a strong economy. And now we are discussing how Brazil will fight its recession.

Anyways, Prof. Velasco points to this interesting story. Brazil was named as Belindia by one of its econs 40 years ago:



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