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China: The Morphing Dragon

Otaviano Canuto's picture

The Chinese economy has changed dramatically over the last three decades. While its per-capita income was only a third of that of Sub-Saharan Africa in 1978, it has now reached an upper-middle income status, lifting more than half a billion people out of poverty. The numbers are dramatic: per capita income has doubled for more than a billion people in just 12 years. What was once a primarily rural, agricultural economy has been transformed into an increasingly urban and diversified economic structure, with decentralization and market-based relations rising relative to the traditional government driven command-based economy.

Urban Careers and the Twenty-Ninth Day

Dan Hoornweg's picture

Lily pads on lakeA helpful way for young math students to grasp the concept of exponential growth is to look at water lilies growing on a pond. They grow exponentially and double in area each day. If they will fully cover the pond by the 30th day, on what day is the lake half covered? The twenty-ninth day[1].
This year I had the honor of teaching 4th year energy systems students who will graduate later this month (their blogs on energy issues will be presented on this site over the summer). These graduates are particularly essential. During their careers they will be part of the world’s largest ever city-building spree. Their task will be to again double the world’s cities.

Growing after the Crisis: Boosting Productivity in Developing Countries

Otaviano Canuto's picture

Spring in DC draws more than just tourists. Last week, government officials, policy makers, civil society representatives and other thought leaders converged to take stock of the global economy during the IMF-World Bank spring meetings. The tone in the hallways was optimistic, but cautious. Growth in advanced economies still remains tepid, weighed down by lingering effects of the global financial crisis, demographic challenges, as well as weakening innovation and productivity growth.  At the same time, there are encouraging signs that developing countries are in good shape, thanks to fiscal buffers that helped them to weather the storm.

Nevertheless, we must be mindful of the work ahead: the IMF warned of a ‘3-speed recovery’, where emerging markets are growing rapidly, the United States is recovering faster than most other advanced industrial countries, but Europe continues to struggle. Where does this leave developing countries? At a meeting with the G24 – a group of developing countries - I had the privilege of discussing the prospects for growth, and policies needed to achieve productivity growth essential for eliminating extreme poverty and for creating shared prosperity.

The Buzz of Cities

Dan Hoornweg's picture

BeeFor bees, bigger hives are better. 

Last week researchers at the University of Arizona published their findings: bees of bigger hives have more information and forage better. With improved communications, bees from the bigger hives sent new foragers to known resources up to four hours earlier than bees from smaller hives.1

This better communications also seems to work in bigger cities. Geoffrey West and the Santé Fe Institute provide impressive modeling on the scaling of cities. Double the size of a city and you get 1.15 times the growth of economy, patents and innovation. And as long as you can keep congestion and pollution in check, you can get this economic growth at only 0.85 times the cost of additional infrastructure. In other words, larger cities have a disproportionate impact on a country’s communications, and therefore a bigger impact on economy and culture.

Caribbean growth: business as usual not enough

Andrea Gallina's picture

“For the first time, I saw that the Government was thinking about the same issues as I was. I didn’t know.”

These hotel owner’s words are characteristic of many in Saint Vincent and the Grenadines. In many OECS countries, trust between the public and private sector may be at historically low levels but the implications for policy making are enormous, particularly at a time in which tough choices need to be made.

Inclusion is No Illusion

Zahid Hussain's picture

The World Bank’s recent report Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges examines inclusiveness along three dimensions—poverty, inequality, and the distribution of economic opportunities. The findings are summarized in this post.

Economic growth in the last two decades in Bangladesh has been pro-poor. Poverty declined significantly from 58.8 percent in 1991/92 to 31.5 percent in 2010. Bangladesh succeeded in “bending the arc of poverty reduction” in the decade ending 2010, a period in which the number of poor declined by around 15 million, compared with a decline of about 2.3 million in the preceding decade. There has also been regional convergence in poverty patterns during 2005-10. Poverty reduction in the lagging Western divisions (Rajshahi, Khulna, and Barisal) was larger than in the Eastern divisions. A number of other indicators of welfare also show notable improvements between 2000 and 2010 for the general population and the poor alike.

Income distribution stabilized after deteriorating in the 1990s. While comparisons based on consumption data have been used to argue that inequality in Bangladesh is low by international standards, when income rather than HIES consumption data are used, inequality appears to be much higher. The degree of income inequality was reasonably low and stable compared to countries such as Malaysia, Thailand and Philippines during the 1970s and 1980s. But there was a sharp increase between 1991-92 and 1995-96. Gini consumption concentration ratios based on HIES 2000, 2005, and 2010 data were almost unchanged while Gini income concentration ratios increased by 3.5 percent during 2000-05 followed by 1.9 percent decrease during 2005-10. The good news is it has been a race to the top in the past decade with consumption growing for the poor and non-poor alike. However, income inequality in Bangladesh is relatively high. Among Bangladesh’s peer group of countries only Sri Lanka has a higher income Gini and Cambodia is close.

Brazilian Competitiveness: Folia and Hangover

Otaviano Canuto's picture

As the Carnival in Brazil kicked off last weekend, Brazilians were ready for a party. They have reasons to celebrate. Despite a lackluster GDP performance in the last two years, unemployment rates remain at record low levels.

How Remittances Grease the Wheels of Bangladesh’s Economy

Zahid Hussain's picture

What impact do remittances have on stimulating overall economic growth? Remittances can be used for consumption and investment which further stimulates demand for goods and services, as well as contribute to financial development. On the other hand, they can create dependence in recipients and cause real exchange-rate appreciation which adversely affects domestic production.

The answer is an empirical one which we can answer using available data. Our findings echo recent economic research which shows that remittances, even when not invested directly, can have an important multiplier effect.

In our study, we focused only on the magnitude of the impact of remittances on aggregate demand in Bangladesh and calculated the traditional Keynesian multiplier effect, that is how much income is generated from every remittance dollar, following the approach adopted by Nicholas Glytsos by estimating a consumption function, an investment function, and an imports function. To estimate the parameters we used data from the Bangladesh Bureau of Statistics national accounts covering the period 1981-2010. We ran simple Ordinary Least Squares regressions to estimate the structural parameters. Here is a summary of our results:

For Bangladesh, More Migrants Mean More Money

Zahid Hussain's picture

Remittances sent by migrant workers have emerged as a key driver of poverty reduction in many developing countries. Bangladesh has caught up with growing migration trends since the mid-70s when only 6,000 Bangladeshis were working abroad. Today, there are about 8 million. Migration has now become a major source of gainful employment for Bangladesh’s growing number of unemployed and under-employed labor force. The sharpest increase in the level of manpower exports occurred during 2006--2009. Remittances have grown at a rapid pace, particularly since 2004.

So, what are the key correlates of aggregate remittance inflows in Bangladesh? What does the data tell us about Bangladesh? Many researchers have used aggregate data to analyze the macro-economic factors affecting the behavior of remitters. For example, Barua et al (2007) show that income differentials between host and home country and devaluation of home country currency positively and high inflation rate in home country negatively affect workers’ remittances1. Hasan (2008) finds remittances respond positively to home interest rate and incomes in host countries2. Ordinary Least Squares estimation is frequently used to characterize the statistical relationships between aggregate remittance inflows and their proximate macro correlates.

The key finding is that a limited number of macroeconomic factors are important in predicting the behavior of aggregate remittances.

Development Optimism from Justin Lin: Review of 'The Quest for Prosperity'

Duncan Green's picture

‘Every developing country has the opportunity to grow at over 8% a year for 20-40 years, and to get rid of poverty within a generation.’ There’s something very refreshing about listening to East Asian development economists, in this case the prolific Justin Lin, a former World Bank chief economist, launching his new book The Quest for Prosperity, at ODI just before Christmas. The contrast between his can-do optimism and the dark clouds of Eurogloom and Afropessimism could not have been greater. But is he right?

While others in development wonkland are increasingly scathing about blueprints and best practice guidelines, Justin is unabashedly a man with a plan. The book takes his paper on ‘Growth identification and facilitation’, (see my earlier review, and Justin’s reply), and boils his thinking down into what he calls a ‘six point recipe’ for developing country governments.