Syndicate content

February 2014

Friday Roundup: Redistribution and Growth, World Development Report 2015, Psychology and Economics, Democracy, and ABCDE 2014

LTD Editors's picture

In a new IMF paper, Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides look into historical data to explore the relationship between inequality, redistribution, and growth and find little evidence of a “big tradeoff” between redistribution and growth.

Robert Chambers of IDS comments on the forthcoming World Development Report (WDR) 2015: Mind and Culture. He raises some important points on participatory thinking.

Trouble ensues when UCLA psychologist Joe Henrich steps into economics territory. Article by Ethan Watter for the Pacific Standard.

Leave Export Promotion to Goldilocks

Ana Fernandes's picture

The successful WTO Ministerial at Bali has placed trade facilitation in the spotlight, but it is export promotion that takes pride of place in most national trade policy agendas. Sometimes export promotion seems a virtuous exercise, targeting small firms most in need of help.  The US Government’s efforts through its Small Business Administration or under the National Export Initiative are an example.  At other times, it seems cold-bloodedly pragmatic, geared towards large firms most able to use assistance.  Examples are government support for national champions from Brazil to South Korea.

A Focus on Growth

Zia Qureshi's picture

The G20 Ministers of Finance and Central Bank Governors met in Sydney over the past weekend. An important outcome of the meeting is a commitment to lift G20’s collective GDP (which accounts for about 85 percent of world GDP) by more than 2 percent above the trajectory implied by current policies over the coming five years. This will amount to over US$2 trillion more in real terms. The higher growth would help generate significant additional jobs.

The targeted increase of more than 2 percent is based on a report prepared by the IMF with inputs from the OECD and the World Bank Group (WBG). The WBG contributions were prepared by a team drawn from various units and led by the Development Economics Vice Presidency. The report finds that with a feasible set of policy reforms, an increase in growth of that order of magnitude is achievable.

Agile Albright: In Conversation

Merrell Tuck-Primdahl's picture

 Simone McCourtie/ World BankIn our messy, multipolar world, daunting problems like responding to climate change, feeding a growing population, and fostering viable states in the wake of conflict were among the topics covered in yesterday’s conversation between Madeleine Albright and Kaushik Basu at the World Bank. Adding levity, the former US secretary of state also spoke of Kim Jong Il’s elevator shoes and bouffant hair, her role in lifting a ban on Iranian caviar, carpets and pistachios, and the byzantine math of the UN Security Council.  

Kaushik held up an interesting mirror for Albright, given his own multidisciplinary perspective as a former economic policy advisor for India (a big cacophonous democracy), as a professor keen to ignite young minds to think creatively about the world, and as a big thinker at an international institution. Most fascinating to me were his questions about the moral imperatives that guided her decisions in the Balkans as well as her ability to grapple with everything from nuclear negotiations to sanctions to a tenuous mission to Pyongyang in October 2000.

Wealth gradients in early childhood cognitive development in five Latin American countries

LTD Editors's picture

Following is an abstract from World Bank Policy research working paper no 6779 by Norbert Schady (Inter-American Development Bank), Jere Behrman (University of Pennsylvania), Maria Caridad Araujo (Inter-American Development Bank), Rodrigo Azuero (University of Pennsylvania), Raquel Bernal (Universidad de Los Andes), David Bravo (Universidad de Chile), Florencia Lopez-Boo (Inter-American Development Bank), Karen Macours (Paris School of Economics & World Bank), Daniela Marshall (University of Pennsylvania), Christina Paxson (Brown University), and Renos Vakis (World Bank).

Research from the United States shows that gaps in early cognitive and noncognitive abilities appear early in the life cycle. Little is known about this important question for developing countries. A recent World Bank owrking  paper, Wealth gradients in early childhood cognitive development in five Latin American countries,  provides new evidence of sharp differences in cognitive development by socioeconomic status in early childhood for five Latin American countries. To help with comparability, the paper uses the same measure of receptive language ability for all five countries. It finds important differences in development in early childhood across countries, and steep socioeconomic gradients within every country. For the three countries where panel data to follow children over time exists, there are few substantive changes in scores once children enter school. These results are robust to different ways of defining socioeconomic status, to different ways of standardizing outcomes, and to selective non-response on the measure of cognitive development.

Tracking the causes of Eurozone external imbalances: New evidence

Aristomene Varoudakis's picture

The Eurozone sovereign debt crisis, triggered by the 2008–09 global financial crisis, exposed macroeconomic imbalances in member countries that had accrued gradually following the advent of the euro in 1999. The growing current-account deficits in the Eurozone periphery and surpluses in the core were a main symptom of these imbalances (Figure 1).1 These patterns of intra-Eurozone current-account imbalances led to the accumulation of large external debts in the Eurozone periphery, matched by growing claims held by commercial banks in the core.

Friday roundup: Participatory development, Fed up in India, Migrants, Young women in Africa, and ag breakthroughs

LTD Editors's picture

L. van Kempen has written an in-depth review in the Journal of Economics of the Bank's Policy Research Report titled 'Localizing Development.' Kempen finds that 'evidence catches up with the narrative.'

The Economist conducts a poll of young Indians, and concludes that young Indians are fed up and desperate for change.

Diversify Development: Go with the Flow

Hans Timmer's picture

Last week, the World Bank's Europe & Central Asia region published Diversified Development, a highly readable report written by Indermitt Gill, Ivailo Izvorski, Willem van Eeghen, and Donato De Rosa. The subtitle, making the most of natural resources in Eurasia, indicates that the report focuses on countries that are currently highly specialized as a result of their comparative advantage in natural resources. It addresses the question to what extent these countries have to diversify to ensure long-term prosperity. Clearer than ever before, the authors show that that is the wrong question to ask. That question gets the causality backwards. A diversified economy can result from successful development, but forced diversification is unlikely to lead to successful development.

Making Informed Investment Decisions in an Uncertain World

Nidhi Kalra's picture

“The most calamitous failures of prediction usually have a lot in common.  We focus on those signals that tell a story about the world as we would like it to be, not how it really is. We ignore the risks that are hardest to measure, even when they pose the greatest threats...We abhor uncertainty even when it is an irreducible part of the problem we are trying to solve.” (Silver 2012)

Each year governments invest billions of dollars towards long-term development. Yet their investment decisions are engulfed in deep uncertainty – about long-term demography, economic growth, technological developments, cost of energy, the impact of climate change, and a host of other factors. Deep uncertainties are difficult to acknowledge, understand, and manage. We are more comfortable facing risks we can quantify and solving problems for which we have familiar, well-honed tools. Compounding the problem, analysts and decision makers routinely face pressure to demonstrate that a decision is risk-free. Political and cultural expediency presses them to ignore rather than acknowledge uncertainty and present their decision as advantageous and certain. Such thinking can keep us in the dark about the real threats to our decision, and may lead us to make brittle decisions that fail when the future surprises us.

India: From BRICS to Fragile ‘n’ (and Back!)

Poonam Gupta's picture

India has covered a long distance in what seems like a short time. Once proudly reckoned as one of the BRICS countries, it is now making frequent headlines in the international financial press as one of the financially fragile countries (fragile 5, fragile 8, edgy eight etc.). Like many other emerging markets in the world, India is feeling the pinch of the global liquidity retrenchment and rebalancing on its exchange rate and capital flows.  Several observers have rationalized the investors’ behavior on account of the hard data on the Indian economy: growth has decelerated (from 8.9 % two years ago to 4.5 percent in fiscal year 2013), current account deficit is reigning high, inflation remains stubbornly high, and savings and investment rates have been falling. And all of this is happening amidst an upcoming national election, when elections anywhere invariably are associated with political and economic uncertainty.

What would it take for India to regain its place in a more revered acronym soon, rather than a less flattering fragile ‘n’ ensemble?

Friday round-up: Agriculture for the future, seafood, ideas trumping interests, plus the locust effect

LTD Editors's picture

William Dar of ICRISAT describes how global farm innovators can help re-green the Sahel.

A new World Bank study, 'Fish to 2030: Prospects for Fisheries and Aquaculture', analyzes the rise in seafood demand and how to sustainably expand aquaculture.

Dani Rodrik has an article in the Journal of Economic Perspects on when ideas trump interests.

Early Feedback on Initial WDR 2015 Pre-Launch Engagement

Stephen Commins's picture
The following post is a part of a series that discusses 'mind and culture,' the theme of the World Bank’s upcoming World Development Report 2015.

As a way of reaching out on the core messages for WDR2015, I asked for feedback on Linked In via two groups that I’m a member of -- the International Development Forum and Society for International Development groups. I received the following diverse comments, including from Tunisia, South Africa, Congo Brazzaville, France, Italy, and the US:
 

It was time! I am impressed that in development literature, classical and practical anthropology is not present. May be they should have listened to Drucker –more well-known than many anthropologists: “culture eats strategy at breakfast”.
 

I trust the [World] Bank will examine 'rationality' among the poor in the context of recent studies which demonstrate a relationship between the stress of day-to-day life, particularly decision-making, among the poor and the loss of cognitive capacity. See here for a popular discussion of the science. Rules of thumb may replace rationality in decision making by poor people as a means of coping with the stress of repeated daily decisions on actions requiring financial resources a poor person does not have. It may be quite challenging for professional economists to enter the mindset of the chronically poor.