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November 2012

Friday Roundup: Kaushik Basu meets CSOs; debating India’s jobs scheme; and tracking fast growing economies

In an interesting post on “From Poverty to Power,” Duncan Green writes about our Chief Economist, Kaushik Basu. Commenting on a recent roundtable for CSOs held in London, Duncan highlights Kaushik’s views on redistribution, taxation, economists, climate change and  multi-player sudoku. With his prior experience in the Indian Government and emphasis on thinking outside the ‘reductionist stereotypes,’ Duncan writes that Kaushik “could prove to be an interesting and innovative voice at the Bank…” Read the entire post here.

On November 16, Kaushik delivered a lecture at Brown University titled ‘From the Slopes of Raisina Hill: India’s Economic Reforms and Prospects’. Watch the video here. He’s posted a power point on ‘The Global Crisis and the Impact On Emerging Economies’ that was delivered at a UNU-Wider seminar on November 26.

Service with a smile: A new growth engine for poor countries

Ejaz Ghani's picture

This post was originally published in Voxeu.org.

Services have long been the main source of growth in rich countries. We argue that services are now the main source of growth in poor countries as well. We present evidence that services may provide the easiest and fastest route out of poverty for many poor countries.

For more than 200 years, it was argued that economic development and growth was associated with growth of the labour-intensive manufacturing sector (Baumol 1967, Kaldor 1966, UNIDO 2009). Services were considered as menial, low-skilled, and low-innovation (McCredie and Bubner 2010). But today, services can be among the most dynamic sectors in an economy. The policy question is whether this is true even in poor countries.

Chart: Jobs account for much of the decline in extreme poverty

From the World Development Report 2013.

Quantitative analysis confirms that changes in labor earnings are the largest contributor to poverty reduction. In 10 of 18 countries, changes in labor income explain more than half the reduction in poverty, and in another 5 countries, more than a third. In Bangladesh, Peru, and Thailand, changes in education, work experience, and region of residence mattered, but the returns to these characteristics (including labor earnings) mattered most. Just having work was not enough, given that most people work in less developed economies. What made a difference for escaping poverty was increasing the earnings from work.

 

Turkey, India’s inflation, a new WTO tool, growth & happiness, and migration & remittances update

Timothy Taylor, Managing Editor of the Journal of Economic Perspectives, re-posts a classic Thanksgiving blog on turkey supply and demand from last November on the Conversable Economist. Read it here.

 ‘Purchasing power parity wages and inflation in emerging markets and developing countries’ is the topic of a new Indira Gandhi Institute of Development Research (IGIDR) working paper by Ashima Goyal that explores the puzzle of the persistent deviation of real exchange rates from purchasing power parity (PPP) values. According to the paper, the conundrum exists because nominal shocks, which cause such deviation, are expected to have only short-run effects. Balassa Samuelson (BS) explains what happens when some goods are non-traded and looks at price differences in advanced economies. However, consistently higher inflation in emerging or developing economies presents separate challenges. Goyal presents a framework that grapples with this, drawing on the case of India.

Cities in the aftermath of great recession

Jean-Jacques Dethier's picture

Cities around the world face a serious fiscal crisis following the Great Recession of 2008. Five years later, the after-effects of this crisis continue to be felt and limit economic opportunities in cities.

Revenue of cities around the world—either generated by municipalities or derived from State transfers—have decreased sharply because of the economic slowdown, as did the fiscal value of real property. Some local governments also lost major assets that they invested in risk funds and banks that collapsed during the crisis. City expenditures—especially spending to address social needs—rose because of the slowdown in economic activity and the corresponding increases in unemployment and social welfare needs.  The decline in revenue and increase in expenditure led many cities to experience the worst “fiscal crunch” in decades. Financing capacities shrank owing to the difficulty in obtaining loans and the increase in the cost of money. Banks and bond issuers—the main financiers of cities—have been heavily impacted. The credit rating of cities was heavily impacted because of declines in the tax base, expenditure pressures and increasing debt. Foreign investment to finance infrastructure has declined; operations underway have been put on hold and many projects have either been cancelled or delayed.

Within Reach

Asma Lateef's picture

With 2015 fast approaching, many of us in the development community are paying close attention to how post-MDG plans are unfolding. At Bread for the World Institute, we are using the 2013 edition of our annual Hunger Report to share our thoughts about getting to 2015 and how we’d like to see the post-MDG agenda develop.

The 2013 Hunger Report, Within Reach – Global Development Goals, calls for a strong push, starting right now, to meet the MDG targets by 2015.

Fecal Matters: Developing the post-2015 sanitation agenda even as the MDGs remain unmet

Eddy Perez's picture

As the world marks World Toilet Day today, with just three years to 2015, there is a need to consider why the MDG targets on access to sanitation have not been met.

In May 2011, the World Health Organization (WHO) and the United Nations Children’s Fund (UNICEF) convened a consultation in Berlin, co-hosted by the German Government, to start a process of formulating proposals for the post-2015 goals, targets and corresponding indicators for water, sanitation and hygiene. The consultation reviewed the current global drinking-water and sanitation monitoring landscape, identified the strengths and weaknesses of the current MDG target and indicators, discussed the relevance of the principles underlying the human right to water and sanitation for consideration in future goals and targets, and reached agreement on a roadmap towards the formulation of a menu of options.  Technical working groups were established to deal with drinking-water, sanitation, hygiene and a fourth area, cutting across these three, on equity and non-discrimination. All working groups were asked to:

Friday Roundup: Poverty and MICs, Aid Data, Gender Equality, James Bond & a Call for Papers

In a post last week, Martin Ravallion pondered the issue of caring equally about poor people wherever they may live.  He provides his thoughts on the merits of overseas development assistance (ODA) to MICs and points out several reasons why it may be time to revisit graduation thresholds. The post generated some buzz, including on The Economist’s Feast and Famine blog. Read it here. Also there are some interesting comments on his post from various experts, as well as a separate post on the topic by Shaida Badiee, Director of the Bank’s Data Group. Read them here.

Is aid data transparent? If this intrigues you, check out the “global aid data visualization” competition being run by The Guardian.  Visualize the world of aid and it’s transparency and win $2000. The competition ends on 29 November, 2012. Find out more here.

Localizing Development: Our Journey

Ghazala Mansuri's picture

While we began a big research project on localized development some 5 years ago and ultimately produced a report that’s launching this week, our journey really began in our twenties. We each spent several years working with low income neighborhoods and community based initiatives in Pakistan and India, respectively.As such, the idea that citizens, particularly those most disadvantaged in their societies, should have a say in decisions that affect their lives and their opportunities has been and remains central to our vision of development as well as our research. We have observed how individuals are transformed when given the chance to speak out against corruption and discrimination at village meetings. We have seen women empowered by the opportunity to form self-help groups and start small businesses. We know from direct experience that without real participation development can neither be effective nor pro-poor.

Some Pitfalls in Global Investing

Sergio Schmukler's picture

Since the 1990s, a large part of world savings have gone to institutional investors that manage those funds by investing around the world. Given this accumulation of resources in professional and sophisticated asset managers, one might expect to see significant international diversification accompanying this process. Yet, to date, little evidence exists on how institutional investors allocate their portfolios globally, and what effect their investment practices have on investors, firms, and policymakers.

In a new paper and VoxEU column, we argue that global funds (those that invest anywhere in the world) are not very well diversified, hold a very limited number of stocks (around 100), and seem to leave behind significant unexploited gains from international diversification. Thus, global funds might not constitute the optimal portfolio for individual investors. Moreover, there are significant challenges to the prospects for broad international diversification. To the extent that global funds continue expanding relative to the more specialized funds (those that invest in specific asset classes and regions), the forgone diversification gains could be significant, and the cost to investors, firms, and countries might be large as well, posing significant challenges to policymakers.

Friday Roundup: Economically shrinking G7, Africa's youth, Chinese labor, Sandy's costs, and Industrial Policy

This week a new forecast and analysis from the OECD highlights how, by around 2025, China's and india's combined GDP will likely exceed that of all the current Group of 7 rich economies. Read it here.

Mo Ibrahim, entrepreneur and billionaire, talks in a video clip about how the promise and risks inherent Africa's demographic bulge require bringing youth to the table when discussing not just jobs, training and places in top schools, but they should also be in on governance discussions.

A Review of the analytical income classification

Shaida Badiee's picture

The World Bank’s classification of economies as low-, lower-middle-, upper-middle-, or high-income has a long history. Over the years these groupings have provided a useful way of summarizing trends across a wide array of development indicators. Although the income classification is sometimes confused with the World Bank’s operational guidelines, which set lending terms and are determined only in part by average income, the classification is provided purely for analytical convenience and has no official status.

Should we care equally about poor people wherever they may live?

Martin Ravallion's picture

Not so long ago, those countries designated as “low-income countries” (LICs) in the World Bank’s World Development Indicators accounted for the bulk of the world’s poor, such as by the $1.25 a day standard. Today many very poor people live instead in what are called “middle-income countries” (MICs).  The change seems dramatic. Almost all (94%) of those below $1.25 a day in 1990 lived in LICs. By 2008 the proportion was down to 26%, with the rest in MICs. Andy Sumner attracted much attention to this aspect of how the global profile of poverty has changed in his paper “Where do the Poor Live?.” Amanda Glassman, Denizhan Duran and Sumner dub this emergence of large poverty counts in MICs as the “new bottom billion.”

There has been much discussion about the implications of this change for overseas development assistance (ODA) and development policy more broadly. In particular, there have been calls for concentrating ODA on the LICs, assuming that the MICs can now look after their own poor.

But we need to look more closely at this “LIC-MIC” distinction, to understand why we have seen this change in the global poverty profile, and what relevance it might have for development policy.

eBay reduces trade costs where it is most needed

Marcelo Olarreaga's picture

eBay, an online marketplace, reduces the effect of distance on international trade by 65%, mainly through a reduction in information frictions that creates trust between market participants. As online markets help overcome market and government failures, the reduction in trade costs is larger where it is most needed: in remote countries with weak institutions that export information-intensive goods.

In the 1990s, many commentators believed that with advances in transportation and communication technologies, geographic distance between countries would soon no longer encumber international transactions. Frances Cairncross (1997) famously predicted the “death of distance”. But despite some anecdotal evidence in support of this prediction, a large number of academic papers has established that distance has been thriving, rather than dying.

When the snow fell on health systems research: a symposium sketch

Adam Wagstaff's picture

Editor's warning: The author wrote this post after hitting his head and suffering some memory loss, and the World Bank cannot vouch for the accuracy of everything reported in it.

It was the perfect finale. In the vast high-tech auditorium of Beijing's International Convention Center, the audience jostled in the queue to pose questions to the final plenary panel of the Second Global Symposium on Health Systems Research. 

First came an elderly lady from the Indian subcontinent who asked why the panelists were so old. "How can we address the issues of tomorrow with the experts of yesterday? If we're going to be serious about universal health coverage, we need youth!" The crowd -- mostly young -- signaled their approval. A middle-aged gentleman from South Africa  tried to engage the panel on the damages inflicted on world nutrition by the global food corporations. Warming to his theme of corporate neocolonialism, land grabs, and genetically modified foods, he invoked the memory of Lenin. "That's Vladimir Lenin", he explained to the crowd, "not John Lennon." "Vladimir who? John who?" wondered the youthful crowd. The chair, the ever-youthful Lancet Editor-in-Chief Richard Horton, whose favored medium is Twitter, asked the gentleman to keep his comments tweet-length. A young woman from Britain's aid agency, DfID, eventually wrestled the mike from Lenin's apologist, and said what was on everyone's mind. "Richard, Dear Leader.", she urged, "Tell us your thoughts. It's you we want to hear!"

CNBC-TV18 India talks to Kaushik Basu on Growth

Following is the trancscript of Kaushik Basu's interview with CNBC-TV18, India, which first appeared on www.moneycontrol.com.

In an interview to CNBC-TV18, Kaushik Basu, chief economist, World Bank said the growth situation has to be taken seriously. "I do believe that, for India, there has to be all focus on growth."

Despite the fact that compared to the rest of the world, India is doing well, he said, it has the potential to get right back to 8.5 percent growth. "We have to put all hands on growth and try to get it back again up as quickly as possible," he added.

Q: You have been appointed as World Bank’s chief economist. So, the view from the inside has now changed to the view from the outside, has not it?

A: A little bit. Three months ago, I moved from the heart of Indian policymaking to seeing it from outside.

Friday Roundup: Unemployment, Jobs, Sectors, and Rethinking Development

How do you measure unemployment? By counting the number of people looking for work but unable to find it. However, this measure overlooks people willing to work and not necessarily looking for jobs. In an interesting chart, The Economist illustrates how a broader measure makes unemployment in Europe look even worse. 
 

Born Equal? How reducing inequality could give our children a better future

Núria Molina-Gallart's picture

As debates on the post-2015 framework gear up, a strong view is emerging that the next development framework must aim at finishing the job that the Millennium Development Goals (MDGs) started at the beginning of the 2000s. There are many lessons that the development community has learnt about what worked and what should be improved this time around. A new report by Save the Children published today on the occasion of the second meeting of the United Nations High Level Panel on post-2015 in London, Born Equal: How reducing inequality could give our children a better future, argues that inequality is one of the MDGs’ blind spots that needs to be addressed in the next development framework to accelerate progress towards the MDGs and to deliver the promise to eradicate extreme poverty.