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November 2013

Shared Prosperity, Poverty Mitigation and the Art of Reasoning

Kaushik Basu's picture

The growth v. inequality debate attracts such widespread participation because, at entry level, it makes such minimal demands on the human intellect. But the debate can be conducted at many levels, leading us into some intricate and indeed treacherous terrain. The newly-declared goals of the World Bank Group—to end extreme poverty in the world by 2030 and to promote shared prosperity in all societies—take the Bank into this disputed terrain and compel it to join in this important policy debate. I have just published a paper to elaborate on the meaning of these goals, examine their strengths and weaknesses, and to initiate a discussion of what kinds of policies these goals push us towards.

Poverty and Disasters—Why resilience matters

Jun Erik Rentschler's picture
Family whose home floods every year. Colombia | Photo: © Scott Wallace / World Bank
Family whose home floods every year. Colombia
Photo: © Scott Wallace / World Bank

It is an alarming trend: extreme weather events and disasters recorded around the globe are increasing in frequency, and in the magnitude of overall economic losses they cause. The recent devastation left by Taiphoon Haiyan in the Philippines is a tragic reminder that many countries around the world continue to be highly vulnerable to natural hazards. While low- and high-income countries alike experience extreme natural events, it is particularly in lower income countries where such events result in economic and humanitarian disasters.

However, the statistics on casualties and economic losses reported in the media fail to give us the full picture of a much more complex, extensive, and prolonged tragedy — which is mainly experienced bythe poorest.

Reflections from the WDR road show

Rasmus Heltberg's picture

Since the WDR 2014 launched in early October, members of the WDR team have been travelling to many cities in different countries to present the Report. These trips are colloquially known as the "road show"—a grossly misleading term since travel is mostly by air and the events are more characterized by discussion among professionals than by show-bizz.

I would like to take the time to reflect on what I have been hearing at three very interesting and well-attended events held recently at the Institute for the Study of International Development at McGill University in Montreal, United Nations  in Geneva, and at the Independent Evaluation Group (IEG), World Bank, Washington D.C. (full disclosure: I work there now).

​Friday Round up: USAID on ending poverty, Helping after Haiyan, Reforms in China, debate on liquidity traps

LTD Editors's picture

'Ending Extreme Poverty' was the focus of an impassioned, thoughtful speech by USAID Administrator Rajiv Shah on November 21 at the Brookings Institution. Related to that, Laurence Chandy draws heavily on World Bank estimates to make his own interactive analysis of what it will take to end poverty by 2030. 

Free Schooling is Not Really Free for the Poor: Corruption in Education and Inequality

Forhad Shilpi's picture

There is a broad consensus among the academics and policy makers that education is one of the most important policy instruments in promoting inclusive economic growth. For example, Stiglitz (2012, P. 275) notes "(O)pportunity is shaped, more than anything else, by access to education", and Rajan (2010, P.184) argues "..the best way of reducing unnecessary income inequality is to reduce the inequality in access to better human capital". A focus on building the human capital of the poor seems triply desirable: (i) it is the only asset that every poor person 'owns'; (ii) human capital is inalienable and thus less susceptible to expropriation, an important advantage in many developing countries suffering from a lack of rule of law; and (iii) returns to education are expected to increase over time with globalization because of skill-biased technological change. Recognizing this unique role of education, a large number of developing countries over the last few decades invested heavily in policies such as free universal schooling (at least at the primary level), scholarships for girls, free books, and mid-day meals. The basic assumption is that such policies would lessen the burden on poor families for educating their children, and thus help reduce educational and income inequality and improve the economic mobility of the children from poor families. However, this widely accepted policy view does not take into account the effects of corruption in schools in developing countries.

Friday Roundup: Kaushik Basu on twin goals, natural disasters and the poor, FDI to South Asia, women in the Ethiopian workforce, and financial inclusion

LTD Editors's picture

Written in the wake of the World Bank Group's two recently adopted overarching goals — ending extreme poverty by 2030 and promoting shared prosperity — Kaushik Basu's new working paper examines the longstanding debate on growth, redistribution, and poverty. Basu analyzes past poverty trends on poverty and sheds new light on an old debate.

Jun Rentschler's new paper presents empirical evidence of the profound and long-term damage from adverse natural events on poverty. The paper discusses detrimental long-term consequences for the income and welfare of the poor and the presence of poverty traps that result from damages to productive assets, health, and education.

Two approaches for answering the question ‘What is the effect of growth on the distribution of opportunities?’

Paolo Brunori's picture

In recent years, measuring the distributive impact of growth has emerged as an important topic in the field of economic development. A wide set of analytical models have been proposed to assess the distributional impact of growth, and to understand the relationship between poverty, inequality and growth. The main instrument for this kind of analysis is the Growth Incidence Curve (GIC), plotting the mean income growth of each percentile in the distribution, between two points in time, proposed by Martin Ravaillon and Shaohua Chen (2003). While a common feature of these models has been a focus on individual achievements, such as income or consumption, a growing number of scholars and policy makers have argued in the last two decades that equity judgments should be based on opportunities rather than on observed outcomes.

Financial Inclusion and the Role of the Post Office

Leora Klapper's picture

Financial inclusion is a topic of increasing interest on the international policy agenda. Last week the Universal Postal Union (UPU) hosted the 2013 Global Forum on Financial Inclusion for Development. With over a billion people using the postal sector for savings and deposit accounts and a widespread presence in rural and poor areas, post offices (or “posts”) can play a leading role in advancing financial inclusion. In Brazil more than 10 million bank accounts were opened between 2002 and 2011 after the post established Banco Postal in partnership with an existing financial institution. However, leveraging the large physical network of the post is not without challenges. Posts generally have little or no expertise in running a bank and the business model that a government pursues in providing financial services through the postal network may be critical to its success.

Friday roundup: Fuel subsidies, Stiglitz on US investment pacts, Afro optimism, China Plenum and OECD aid overhaul

LTD Editors's picture

'A 12-Step Program for Fuel Subsidy-aholics' by Eric Morris on Freakonomics lays out ideas for how to limit or eliminate such subsidies, drawing on research by the IMF and others.

In a Project Syndicate piece titled 'South Africa breaks out', Joe Stiglitz explains why several important emerging market countries are not fans of either the transatlantic or Pacific investment pacts now being negotiated.

A New Pew Research Report finds Despite Challenges, Africans Are Optimistic about the Future. Indeed, the survey actually shows that, when it come to the economic Outlook, respondents were more positive in Africa than Europe or Middle East.

The organization of political parties and the politics of bureaucratic reform

LTD Editors's picture

Bureaucratic reform is a priority of donor organizations, including the World Bank, but is notoriously difficult to implement. In many countries, politicians have little interest in the basic financial and personnel management systems that are essential to political oversight of bureaucratic performance. A new paper by Cesi Cruz and Philip Keefer presents a new perspective on the political economy of bureaucracy. Politicians in some countries belong to parties that are organized to allow party members to act collectively to limit leader shirking. This is particularly the case with programmatic parties. Such politicians have stronger incentives to pursue public policies that require a well-functioning public administration. Novel evidence offers robust support for this argument. From a sample of 439 World Bank public sector reform loans in 109 countries, the paper finds that public sector reforms are more likely to succeed in countries with programmatic political parties. Read the entire paper here.

Seeing the Human Face of the Global Financial Crisis

Inci Otker-Robe's picture

The collapse of a US investment bank in the fall of 2008 turned a severe credit crunch into the worst financial crisis since the great depression, providing a blunt reminder that mismanagement of risks does not go unpunished. What is more, mismanaged risks do not respect boundaries in a tightly interconnected world, damaging anything they touch on their path, hurting especially the poor and vulnerable. While financial systems can contribute to economic development by providing people with useful tools for risk management, such as credit, savings, and insurance, they can create severe crises with devastating social and economic effects when they fail to manage the risks they retain.

Friday Roundup: Development Impact Bonds, Good Governance, and Doing Business

LTD Editors's picture

Matthew Bishop of The Economist, describes the concept of Development Impact Bonds (DIBs).  The idea is that a delivery agent (an NGO, for example) figures out how to make a measureable improvement in some social problem, someone (usually government, perhaps philanthropy) agrees to pay for that outcome if it is achieved, and investors provide financing that pays for the intervention. Learn more on the Philanthrocapitalism Blog.