The recent rise in China’s inflation has grabbed attention of the public and policymakers alike. Consumer price inflation rose to 5.1% in November. This is higher than we are used to in China, although it is modest in an emerging market perspective. To determine the best policy response to the rise in inflation it is important to know its cause and how much inflation we should expect in the coming 12 months. It is also good to decide what an acceptable rate of inflation is for a country like China.
East Asia and Pacific
The Programme for International Student Assessment (PISA) 2009 survey results were released today by the Organisation for Economic Co-operation and Development (OECD). PISA tests 15 year olds in reading, math and science.
Pisa 2009 results focus on reading, as they did in 2000 when the tests were first applied. In reading, as the OECD reports, Korea and Finland are the highest performing OECD countries, with mean scores of 539 and 536 points. However, as noted in today's New York Times, Shanghai-China outperforms them by a significant margin, with a mean score of 556. Top-performing economies in reading include Hong Kong-China (533), Singapore (526), Canada (524), New Zealand (521), Japan (520), Australia (515) and the Netherlands (508).
At the US release of the PISA results in Washington DC, which I was fortunate to attend today, Department of Education Secretary Arne Duncan and OECD Secretary General Angel Gurría, discussed the importance of the results in terms of competitiveness and growth.
I am writing from Seoul, where I participated in the Economic Development and Impact Evaluation conference organized by the Korea Development Institute. Korean officials at the conference had a consistent and forceful message: aid works.
The Wildlife Friendly Ibis Rice program has begun purchasing a new crop of rice for the coming year. The first 7 tons of paddy (out of a total of about 120 tons for 2011) was procured last week. Participating farmers were paid a premium of 100 riel per kilogram above middleman prices for their rice.
The World Bank employs a variety of specialists in different disciplines, often with abstract and hard to understand titles. Not me. When people ask what I do for the Bank I say “I build roads”. This often brings laughs from other Bank staff, but it’s true.
The Seoul G20 summit in November ended with some homework for the World Bank. We were asked to work with the ILO, OECD and UNESCO to develop internationally comparable indicators of skills that can help countries in their efforts to better match education and job training to market needs. The G20 was right to make this a priority.
In this post-financial crisis period, jobs play an important role in recovery. Making sure that people have the right skills to get these jobs is the other side. Developing countries, especially, know that skills development is necessary if they are going to attract investment that will create decent jobs and raise productivity.
The only thing worse than taking 5 hours to drive 106 km along winding and often damaged mountainous roads, is the realization that having reached your destination you have to turn around and repeat the trip to get home. That was in the forefront of my mind as I sat in the very quiet town of Ainaro, south of the capital in Dili.
Remember the food and fuel crisis that preceded the global economic and financial meltdown? Many in the advanced economies have long forgotten it; people in developing countries have very vivid memories. Are we about to relive the crisis?
We all know that the quality of the air we breathe has an immense impact on the health of the people and the economies of developing countries. Poor air quality can also threaten the economic competiveness of cities. Increasingly global companies consciously chose to locate in livable cities. We’re already seeing that in Asia. A 2006 survey by the Hong Kong’s Chambers of Commerce showed that worsening air quality was beginning to affect investment decisions of corporations.
I spent two days last week at the Suntec Center in Singapore attending the Better Air Quality conference. This year’s theme was Air Quality in a Changing Climate. The link between the two – improved air quality and reducing climate change is sometimes not so apparent and I am glad the conference was making the link clearer. Climate change impacts all countries but the World Development Report 2010 estimates that some 75-80 percent of the damages caused by a changing climate will be borne by developing countries. If we are to limit global warming to about 2 degrees Celsius above the pre-industrial level, we will all need to invest massively in energy efficiency, renewable energy sources, and more efficient transportation.
Combating air pollution is one area where it is possible to capture important co-benefits with respect to climate change. By taking specific measures, we can simultaneously achieve local health and welfare benefits (including related to air quality) while also reducing greenhouse gas (GHG) emissions. While it is important to strive for a global deal on climate change, there are a number of things that cities can do in the interim to simultaneously reduce local environmental impacts and reduce carbon emissions. And by demonstrating on the ground some things that can work in this regard, cities can position themselves to access any global carbon financing that might become available as part of a global deal.
There is a shared sense that globalization has a strong potential to contribute to growth and poverty alleviation. There are several examples of countries in which integration into the world economy was followed by strong growth and a reduction of poverty, but evidence also indicates that trade opening does not automatically engender growth. The question therefore arises, why the effects of globalization have been so different among countries of the world.
A look at changes in the structure of employment in Latin America and in Asia hints at possible explanations for observed differences in the growth effects of trade. Since the 1980s, Asia and Latin America have both rapidly integrated into the world economy. Asia has enjoyed rapid employment and productivity growth, but the consequences for Latin America have been less stellar.
The chart below shows how the pattern of structural change has differed in the two continents. The chart decomposes labor productivity growth in the two regions into three components: (i) a “within” component that is the weighted average of labor productivity growth in each sector of the economy; (ii) a “between” component that captures economy-wide gains (or losses) from the reallocation of labor between sectors with differing levels of labor productivity; and (iii) a “cross” component that measures the gains (or losses) from the reallocation of labor to sectors with above-average (below-average) productivity growth. The underlying data for the charts come from the Groningen Growth and Development Centre.