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February 2009

Implications of the "buy American" clause for trade policy in African countries

President Obama on February 17 signed the $787 billion Stimulus package into law. The package is aimed at stimulating production in the US as well as job creation. However, it includes the following clause: 

SEC. 1605. USE OF AMERICAN IRON, STEEL, AND MANUFACTURED GOODS
(a) None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.
(b) Subsection (a) shall not apply in any case or category of cases in which the head of the Federal department or agency involved finds that—(1) applying subsection (a) would be inconsistent with the public interest;(2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or(3) inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.
(c) If the head of a Federal department or agency determines that it is necessary to waive the application of subsection (a) based on a finding under subsection (b), the head of the department or agency shall publish in the Federal Register a detailed written justification as to why the provision is being waived.
(d) This section shall be applied in a manner consistent with United States obligations under international agreements.

One childhood

Rarely do we come across a video that is visually beautiful, intellectually stimulating and emotionally inspiring.  “One childhood” is a documentary about how schools and schoolteachers in Eritrea are part of the campaign to improve children’s health.  Based on the actual findings of two thorough technical evaluations that showed the wide coverage and effectiveness of the Eritrea programs, the film tells the story of how school health is now being delivered in the mountains of Eritrea, in the arid lands of the Red Sea coast and in urban Asmara.  Available on YouTube, where it has been seen by 14,000 people in a month—probably 13,980 more than read the two technical reports—the film has won the CINE Golden Eagle award.  It can also be viewed here.

Truth in advertising:  The film’s executive producer, Don Bundy, is a colleague and may be a distant cousin of mine [don’t ask!].

Les douanes camerounaises se regardent dans le miroir

En Afrique, l’administration des douanes joue un rôle de tout premier plan dans le développement économique et social puisque les droits et taxes collectées par les douanes représentent bien souvent au moins 30% des recettes du budget national (hors pays pétroliers). Dans le même temps, c’est l’une des administrations les plus décriées étant bien souvent décrites comme le symbole même de la corruption et un terrible frein au commerce.

Will the economic crisis affect governance and conflicts in Africa?

World economic growth in 2009 is expected to decline to its slowest rate since the Great Depression. In the case of Sub-Saharan Africa, the latest IMF’s World Economic Outlook projects the region to grow by 3.25% this year, down from 5.4% in 2008. Many economists are now expecting the crisis to hit Africa harder and longer than was previously projected. Not only will the crisis impact human development and economic indicators, but Africa’s governance and conflicts may be affected as well. Although the channels through which economic collapses affect governance and conflicts are often country-specific, institutions in poor countries tend to be so strained that ethnic tensions and confrontational politics can get worse when competition for scarce resources increases.

Empirical evidence on growth accelerations and collapses in Africa between 1975 and 2005 suggests that governance and conflict indicators are substantially affected by growth volatility. Table 1 presents differences between sample averages during growth accelerations and collapses for key governance and conflict indicators. The World Bank’s Country Policy and Institutional Assessment (CPIA) score, a broad measure of policy and institutional performance, is lower during decelerations. Correlation coefficients (not reported) between the probability of growth acceleration and deceleration and CPIA indicator confirm that countries that experience more economic collapses have lower CPIA scores.

Presque au hasard

La « randomisation » – ou application par répartition aléatoire – des programmes d’aide est actuellement considérée comme la « règle d’or » permettant d’évaluer l’impact de chaque projet et de trouver les schémas d’intervention les plus efficaces possible. Des études antérieures ont été critiquées en raison de leur portée limitée, c’est pourquoi des interventions plus récentes portent désormais sur de plus larges échantillons de population.

A sub-prime crisis in the U.S. and infant deaths in Africa

The U.S. sub-prime crisis triggered a financial market meltdown which, in turn, has led to a global recession. These developments are already having a significant, negative effect on African economic growth (the latest World Economic Outlook  projects Africa’s growth rate in 2009 at 3.5 percent, down from 5.4 percent in 2008.) Drawing on the work of Jorge Arbache and John Page, I did the following calculation: If Africa experiences a growth deceleration that is typical of the average deceleration of the past, the infant mortality rate will rise by about 28 per thousand (see Table). Given that there are 28 million births a year in Africa, this translates to over 700,000 additional babies dying before their first birthday.

My colleague Matthias Lundberg did a somewhat different analysis by estimating the elasticity of infant mortality with respect to income worldwide, and then plugging in the IMF’s most recent forecasts for global income growth. He obtains an estimate for increases in infant deaths worldwide of 200,000-400,000 per year.

Needless to say, the two estimates represent different methods and even different data sources. The most important difference is that the Arbache-Page calculation is based on a particular definition of a growth deceleration (sometimes referred to as a growth collapse)—namely that the four-year forward moving average growth and per capita income are less than the four-year backward moving average—which Africa may experience but has not yet experienced from the global crisis. Meanwhile, Matthias’ calculation is looking at marginal changes in income and the association with infant mortality.

Almost random

Randomized program implementation is currently seen as the ‘gold standard’ for impact evaluation in the search for the most effective development interventions. Earlier studies were criticized for their limited scope, so some of these interventions now involve large populations. Unfortunately, the larger the intervention, the larger is the danger that people who were supposed to get the treatment do not receive the intervention and vice-versa. Do such deviations invalidate the conclusions drawn from randomized studies? My colleague Harold Alderman together with Harvard economist Sebastian Linnemayr address this question in a paper  that evaluates the impact of a randomized nutrition intervention on the anthropometric status of Senegalese children. The paper confirms that the measured impact is stronger in villages that actually received the intervention compared to those that should have received it. This confirms the view that large scale community based health promotion can get parents to take better care of their children—and that children will benefit from this. The paper illustrates that randomization, even though it was not strictly followed, still assists in identifying the program’s impact.   Given the rapidly increasing number of large-scale randomized interventions, more studies addressing this sort of questions are needed. The most valuable lessons will come from studies that confront these difficulties rather than ignoring them. The real world differs fundamentally from the laboratory setting in which the method of randomized experiments first was developed. It is time to address this fact in order to learn real lessons from and for real people.