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Poverty

The Things We Do: Saving for Change

Roxanne Bauer's picture

At the basis of communication and public policy are assumptions about human beings- their rationality or irrationality, their foibles, wants and preferences. A lot depends on whether these assumptions are correct. In this feature, we bring you fascinating examples of human behavior from across the globe.

Saving money is hard.  However, it is also considered to be necessary for making large purchases like a house or car, opening up a business, or planning for retirement. Saving can be particularly difficult for the poor who live day-by-day and do not have much disposable income.  In wealthier countries, financial institutions offer a variety of products to help their clients set aside savings, but in poorer countries, there are fewer savings options. Many poor people end up hiding cash, investing in assets such as livestock or land, or engaging in informal savings arrangements

Yet, for those who have even a little money to stow away, the benefits can be enormous. Massachusetts Institute of Technology (MIT) economists Abhijit Banerjee and Esther Duflo have found that even those who live on less than $1 per day have the ability save and often spend money on nonessential items such as alcohol, tobacco, and televisions.  Moreover, when poor people increase their earnings, they spend only two-thirds of their increased income on food.  These findings suggest that poor people do have funds to save.

But why is it so difficult for people of all income levels to save?

Will more debt hinder the development of the Dominican Republic?

Co-Authors: Aleksandra Iwulska, Javier Eduardo Báez and Alan Fuchs

In April this year the Dominican Republic borrowed 1.25 billion US dollars on international markets in 30-year bonds. The DR is the only country in the B investment rating group that  successfully issued 30-year bonds in the last 6 years. The country has a total of 2.75 billion US dollars for three issuances in the past 15 months.

At the same time, debt levels have been growing in the country: non-financial sector public (NFPS) debt doubled from 18.3 percent of GDP in 2007 to 36.6 in the first quarter of 2014.When considering the DR Central Bank debt stock, levels would be already close to 47 percent of GDP. It is worth noticing that Jiménez and Ovalle (2011) estimated in 56.7% the debt to GDP the maximum debt to GDP threshold that investors would consider sustainable for the DR in 2013.  Meanwhile, interest payments reached a peak of 2.4 percent of GDP in 2012-13 and external debt stood at 25 percent of GDP in 2013, levels not seen since the economic crisis of 2003. But the economic realities in the DR now are much different than they were in 2003. GDP grew by 4.1 percent last year and 5.5 percent in the first quarter of 2014. The Central Bank forecasts the annual economic growth at 4.5 percent this year. Meanwhile, central government fiscal deficit dwindled from 6.6 percent of GDP in 2012 to 2.9 percent in 2013.

The need to improve transport impact evaluations to better target the Bottom 40%

Julie Babinard's picture
In line with the World Bank’s overarching new goals to decrease extreme poverty to 3 % of the world's population by 2030 and to raise the income of the bottom 40% in every country, what can the transport sector do to provide development opportunities such as access to employment and services to the poorest?

Estimating the direct and indirect benefits of transport projects remains difficult. Only a handful of rigorous impact evaluations have been done as the methodologies are technically and financially demanding. There are also differences between the impact of rural and urban projects that need to be carefully anticipated and evaluated.

Can we simplify the methodologies?

Despite the Bank’s rich experience with transport development projects, it remains quite difficult to fully capture the direct and indirect effects of improved transport connectivity and mobility on poverty outcomes. There are many statistical problems that come with impact evaluation. Chief among them, surveys must be carefully designed to avoid some of the pitfalls that usually hinder the evaluation of transport projects (sample bias, timeline, direct vs. indirect effects, issues with control group selection, etc.).

Impact evaluation typically requires comparing groups that have similar characteristics but one is located in the area of a project (treatment group), therefore it is likely to be affected by the project implementation, while the other group is not (control group). Ideally, both groups must be randomly selected and sufficiently large to minimize sample bias. In the majority of road transport projects, the reality is that it is difficult to identify control groups to properly evaluate the direct and indirect impact of road transport improvements. Also, road projects take a long time to be implemented and it is difficult to monitor the effects for the duration of a project on both control and treatment groups. Statistical and econometric tools can be used to compensate for methodological shortcomings but they still require the use of significant resources and knowhow to be done in a systematic and successful manner.

Philippines: Why We Need to Invest in the Poor

Karl Kendrick Chua's picture
A fish vendor waits for customers in his stall in Cebu City. According to the latest Philippine Economic Update, pushing key reforms to secure access to land, promote competition and simplify business regulations will also help create more and better jobs and lift people out of poverty. ​(Photo by World Bank)



In my 10 years of working in the World Bank, I have seen remarkable changes around me. In 2004, Emerald Avenue in Ortigas Center, where the old World Bank office was located, started to wind down after 9 PM.  Finding a place to buy a midnight snack whenever I did overtime was hard. It was also hard to find a taxi after work.

Today, even at 3 AM, the street is bustling with 24-hour restaurants, coffee shops, and convenience stores, hundreds of BPO (Business Process Outsourcing) employees taking their break, and a line of taxis waiting to bring these new middle class earners home. Living in Ortigas Center today means that I also benefit from these changes.

Where in the world are young people out of work?

Leila Rafei's picture

As International Youth Day approaches next week, I've found myself wondering what are the primary issues affecting young people throughout the world. One topic that seems to be a common thread across regions and income groups is youth unemployment, which remains more than double the rate of unemployment for the general population.

It's well known that youth populations are on the rise in the developing world, particularly. What does this mean for the millions of young people who enter the workforce every year?

Youth unemployment is defined as individuals aged 15-24 who are without work, but are currently available for work and have sought it in the recent past. Below, I analyze data from World Development Indicators. These data come originally from the International Labour Organization (ILO), which produces its own estimates that are harmonized to account for inconsistences in the data source, definition, and methodologies. ILO estimates may differ from official unemployment statistics produced by national statistical offices.  

Asia maintains lowest levels of youth unemployment
Regional levels of youth unemployment have barely changed in the past two decades. South Asia and East Asia and Pacific have maintained the lowest rates, hovering at about 10% for the last 20 years. Meanwhile, the Middle East and North Africa region has had the highest rate of youth unemployment since the 1990s, and clocked in a figure of about 27% in 2012. The biggest increase in the youth unemployment rate has been in the Europe and Central Asia region, where after years of steady decline rates have risen to over 20% since the financial crisis in 2008.

Chart 1

Competitiveness is Key to Trade and Development in Africa

Anabel Gonzalez's picture
Textile factories are an important source of employment in Lesotho, which benefits from the AGOA agreement. Photo credit: John Hogg / World Bank. As World Bank President Jim Kim told the African leaders who gathered in Washington for the U.S.-Africa Leaders Summit this week: African countries have enormous potential to increase trade, drive growth, reduce poverty, and deliver jobs. They face constraints, to be sure, but the World Bank Group is working with our African partners daily to improve the competitiveness of their industries and boost the volume and diversity of their trade with the rest of the world.

At a high-level meeting at the World Bank on Monday, African ministers and delegations representing 51 countries had a pressing concern: the renewal and modernization of the African Growth and Opportunity Act (AGOA). A preferential program that enhances the access of qualifying African countries to the US market, the law is due to expire in September 2015.

Powering up Africa’s Renewable Energy Revolution

Makhtar Diop's picture
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As African Presidents, Prime Ministers, and business leaders arrive in Washington to attend the first US-Africa Summit, one topic that will be paramount in their discussions with President Obama and his Cabinet is: how governments and families can access affordable electricity across the African continent.

Consider the facts: one in three Africans, that’s 600 million people, has no access to electricity. Neither do some 10 million small and medium-sized enterprises. Those homes and businesses fortunate enough to have power pay three times as much as those in the United States and Europe; furthermore, they routinely endure power outages that cost their countries from one to four percent in lost GDP every year.

Akosombo Dam in Ghana, June 18, 2006. (Photo by Jonathan Ernst)Despite the fact that Africa is blessed with some of the world’s largest hydropower and geothermal resources (10-15 GW of geothermal potential in the Rift Valley alone), bountiful solar and wind resources, as well as significant natural gas reserves, total power generation capacity in Africa is about 80,000 megawatts (MW) (including South Africa), roughly the same as that of Spain or South Korea.

As Africa enters its 20th consecutive year of economic expansion, with the World Bank forecasting that Africa’s GDP growth will remain steady at 4.7 percent in 2014, and strengthening to 5.1 percent in each of 2015 and 2016, the continent needs more electric power. Specifically, Africa needs to add 7,000 MW of generation capacity each year to meet the projected growth in demand, yet it has achieved only 1,000 MW of additional power generation annually.

Over the last week I visited Cameroon and the Democratic Republic of the Congo, two of Africa’s so-called ‘fountain states.’  The resources in these two countries – along with Guinea, Ethiopia, and Uganda – can generate enough hydroelectricity to satisfy the growing demand in Africa. I saw the range of applications for which this power is needed, and I saw clear solutions.

In Eastern Cameroon I visited the construction site for the Lom Pangar hydropower project. Once construction is complete and the reservoir is filled in the next couple of years, this new dam on the Sanaga River will improve the reliability of power supply and lower the cost for up to five million Cameroonians. The Lom Pangar project will also pave the way for developing the full 6,000 MW of hydropower potential of the Sanaga River by regulating the flow of the river.      
 
In the Democratic Republic of Congo, last week, I visited the Inga hydropower site on the mighty Congo River. DRC’s overall hydropower potential is estimated at 100,000 MW, the third largest in the world behind China and Russia, yet only 2.5% of this key resource has been developed. With 40,000 MW of generation potential, Inga is the world’s largest hydropower site. Its proper development can make Inga the African continent’s most cost-effective, renewable source of energy with an estimated generation cost of US$ 0.03 per kilowatt hour with little or no carbon footprint--a significant added virtue.

August 1, 2014: This Week in #SouthAsiaDev

Mary Ongwen's picture
We've rounded up 20 tweets, posts, links, and +1's on South Asia-related development news, innovation and social good that caught our eye this week. Countries included:Bangladesh, India, Nepal, Pakistan and, Sri Lanka.

How avocados are changing the way of life of Peruvian farmers

Maria Margarita Nunez's picture
Recently planted avocado trees in the Alto Laran district, in Peru.
Recently planted avocado trees in the Alto Laran district, in Peru.

A five hours’ drive south of Lima lays the coastal provinces of Chincha. If one heads inland into the deserted mountains that are typical of costal Peru, one would be surprised to find agriculture blanketing the valley floor. For centuries local communities in these rugged terrains have been using water from small meandering streams to grow maize, and eke out a living by selling surpluses at nearby markets. However, in recent years the growth of industrial agriculture has squeezed these communities, making it hard for them to survive in these ancestral lands, forcing many of them to move to nearby cities such as Chincha Alta.

Measuring Poverty and Inequality in Sub-Saharan Africa: Knowledge Gaps and Ways to Address them

Stephan Klasen's picture
Local children sit on a boulder overlooking the Kenyan slum of Kibera @Gates Foundation
Local children sit on a boulder overlooking the Kenyan slum of Kibera
​@Gates Foundation 



Despite hundreds of millions spent on more and better household surveys across Africa in recent decades, we only have a very rough idea about the levels and trends in income poverty and inequality in sub-Saharan Africa.  Many reasons contribute to this unfortunate state of affairs.


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