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June 2014

Long-Term Finance in EMEs: Navigating between Risks and Policy Choices

Otaviano Canuto's picture

Emerging market economies (EMEs) are making important strides in developing long-term finance capital market vehicles to support investment in strategic areas such as infrastructure. However, since last year, EMEs have suffered from big shifts in terms of market sentiment. While EMEs’ prospects were clearly overhyped in the wake of the crisis, the bleak forecasts that dominated headlines in the second half of last year were similarly exaggerated. There are still a number of factors indicating that EMEs’ role in the global economy will continue to grow—just not as rapidly or dramatically as previously thought.

Trade policy through 2013: Signs of improvement but new policy concerns

Chad P Bown's picture

Temporary trade barriers have become more than an important bellwether for contemporary protectionism; with persistent tariff levels, they are now a primary obstacle to free trade. The World Bank’s newly updated Temporary Trade Barriers Database suggests that the Great Recession-era increases in import protection may be levelling off. Now policymakers begin to face the daunting task of dismantling all of those temporary barriers they imposed during the early phase of the crisis.

Gamification of Thrones

Sana Rafiq's picture

If you put a target in the toilet, men will miss less. That’s the intuition behind the proliferation of strategically placed fake flies in public urinals. While anyone who has had to clean up after a careless aimer might say, “It’s about time,” anyone who has studied behavioral economics might say, “It’s about games.”

Games are fun. We play them for hours on end, of our own free will, without pay, in return for a feeling of accomplishment or virtual badges or points or just the promise of seeing all the cards bounce across the screen at the end of Windows Solitaire.

Development, on the other hand, is serious. People’s health, happiness, and well-being are at stake. Super Mario Brothers? Game. Candy Crush Saga? Game. Poverty, hunger, disease: Not games.

Trade vs. Megacities

Cem Karayalcin's picture

In 2000, Port-au-Prince and San Juan accounted for 62 percent of the urban population respectively of Haiti and Puerto Rico. Though they tied for number one in the world rankings as those urban agglomerations that had the highest percentage of their countries urban populations, they were by no means exceptions. Luanda had 57 percent of the urban population of Angola, while Brazzaville had 54 percent of that of Congo. The list goes on to include many developing countries in Africa, Asia, and Latin America.
 
These remarkably high concentrations of urban populations in one dominant city were a long time in the making. Around 1930, when developing market economies had an average level of urbanization of 13 percent, 16 percent of their urban population lived in fourteen large cities (cities that had populations of more than half a million). Such high urban concentrations in the developed world had been attained in 1880, when its average level of urbanization stood much higher at 23 percent. The number of the large cities in the developing world as well as their share of the total urban population increased dramatically between 1930 and 1980, by which date they had 43 percent of the urban population, a number which paralleled that of the developed countries. However, the level of urbanization in the latter stood at 65 percent whereas developing market economies had an urbanization level closer to 30 percent.

Friday Roundup: WB to update income classifications July 1, Ravallion on the LIS, Oxfam releases poverty index, and solar innovation

LTD Editors's picture

On July 1, the World Bank's Data Group will update its analytical income classification of all the world's economies and, in a related move, they are reviewing their methodology and considering changes going forward. Read the Open Data blog on 'LICs, LMICs, UMICs, and HICs: classifying economies for analytical purposes.' 

Martin Ravallion has a new working paper on the Luxembourg Income Study, or LIS. He ponders whether the LIS is the best model for the truly global micro database that poverty experts need to accurately track and analyze poverty and inequality. 

Three Perspectives on Brazilian Growth Pessimism

Otaviano Canuto's picture

Over the last few years, Brazil’s growth has significantly decelerated. Accompanying this slowdown, a change in commentary on Brazil’s economic future has emerged, and is reflected in a recent ratings downgrade of Brazilian sovereign paper and an overall much-bleaker growth outlook both for the near and medium term. 

In a new 'Economic Premise' note, Philip Schellekens and I examine three contributing factors to this change in sentiment: macroeconomic management, the external environment, and microeconomic fundamentals. Among these, we argue that the relative lack of progress on the microeconomic reform agenda has been far more detrimental to the growth outlook than either the credibility cost of recent macroeconomic management or the negative influence of a less supportive external environment. 

Inequality of opportunity and economic growth: A cross-country analysis

LTD Editors's picture

Income differences arise from many sources. While some kinds of inequality, caused by effort differences, might be associated with faster economic growth, other kinds, arising from unequal opportunities for investment, might be detrimental to economic progress.  A new World Bank study by Francisco H. G. Ferreira, Christoph Lakner, Maria Ana Lugo, and Berk Özler uses two new metadata sets, consisting of 118 household surveys and 134 Demographic and Health Surveys, to revisit the question of whether inequality is associated with economic growth and, in particular, to examine whether inequality of opportunity -- driven by circumstances at birth -- has a negative effect on subsequent growth. The results are suggestive but not robust: while overall income inequality is generally negatively associated with growth in the household survey sample, the study finds no evidence that this is due to the component associated with unequal opportunities.

Aspiring to Understand Aspirations, Part II

Scott Abrahams's picture

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

Most children in Ethiopia and the other developing countries in the Young Lives Survey say they want—and expect—to go to college even though few of them will. Could those dreams differ by gender?

Before we look at the data, who would you predict are more likely to have college hopes: boys or girls? As advocates for gender equality, we would like to find no difference. But then again, there is a reason we need to be advocates for gender equality.

​Friday Roundup: World Cup Migrants, Conflict in Iraq, Dreams and Questions in India, Brain Regain, and Sizing the Middle Class

LTD Editors's picture

The "beautiful game" has finally begun! And as countries compete for the coveted FIFA World Cup, the winner ultimately will be "migrants," writes Christian Eigen-Zucchi. Read his post in the People Move blog here

Vox writes about the terrorist group ISIS, or Islamic State of Iraq and the Levant, which earlier this week took over part of Mosul, Iraq's second largest city, provoking questions about how things got this bad and what can be done to quell the unrest.

Should we be thinking more about imports?

Po Yin Wong's picture

The traditional view of international trade is a mercantilist one. That is, exports are good and imports are bad. Exports are considered good because they add to a country’s gold reserves while imports have the opposite effect. As it turns out, the mercantilist view now stands questioned given the number of theoretical and empirical studies showing the many benefits of imports. In fact, as Paul Krugman remarked, one could turn the mercantilist view on its head and argue that exports are the unfortunate necessity or cost of enjoying imports.  However, the cost-benefit calculus of imports is quite under-researched and in many areas the imports literature lags behind the voluminous literature on exports – perhaps a hangover from the mercantilist bias towards exports.

Poverty, Shared Prosperity, and Trade-Offs

Kathleen Beegle's picture

In April 2013, the World Bank Group endorsed two ambitious goals:  (1) to end extreme poverty by 2030, and; (2) to promote “shared prosperity” by boosting the incomes of the poorest 40 percent of the population in every country. The introduction of the second goal marked a shift in the World Bank Group’s poverty reduction mission. Some might consider the goal #2 to constitute a refinement of a longer-standing -- albeit implicit -- emphasis on growth, widely considered a necessary condition for poverty reduction. 

Is goal #1, ending extreme poverty by 2030, paramount and is goal #2 subsidiary to that first objective? On the other hand, if these two goals are prioritized equally, what might this mean for the extreme poor?  What are the trade-offs between boosting the incomes of the bottom 40 percent in every developing country and ending extreme poverty globally?

Reviewing the Facts on Top Incomes and Inequality in Egypt

Paolo Verme's picture

One of the puzzling aspects about Egypt is that income inequality measured through household surveys before the revolution was very low compared to the perceptions of inequality and injustice voiced by the people of Egypt during the revolution. A recent book on Egypt has tried to explain this apparent mismatch and found several leads that could explain why both the data and the people of Egypt may be right. Household data in Egypt are of good quality and measure income inequality well relative to other comparable surveys worldwide and the people of Egypt had good reasons to complain about social injustice as real incomes declined, prices increased and jobs and opportunities were scarce before the revolution.

Friday Roundup: Of drug resistant malaria, child labor in Brazil, microinsurance via mobile phones, and risky business

LTD Editors's picture

Kathleen McLaughlin writes in The Guardian about a new wave of drug-resistant malaria that may be spreading from Southeast Asia to other parts of the developing world, saying it threatens millions.

'Child Labor and Learning' is the title of a new working paper Patrick Emerson, Vladimir Ponczek and Andre Portela Souza. They use a unique micro panel dataset of Brazilian students to investigate the impact of working while in school on learning outcomes. The potential endogeneity is addressed through the use of difference-in-difference and instrumental variable estimators. A negative effect of working on learning outcomes in math and Portuguese is found. The effects of child work range from 3 to 8 percent of a standard deviation decline in test score, which represents a loss of about a quarter to a half of a year of learning on average.

Of peacocks, development theory and empirics: ABCDE 2014

Merrell Tuck-Primdahl's picture

Development economics may be having a bit of a coming out moment, like a peacock unfurling a sheen of multicolored feathers after a long time wandering around a dusty yard with its tail feathers modestly folded.

This was my impression at the 25th  Annual Bank Conference on Development Economics at the World Bank earlier this week. ‘The Role of Theory in Development Economics’ was the theme, but the proverbial church was broad.

Development Economics and Method: A Quarter Century of ABCDE

Kaushik Basu's picture

[Opening Remarks at the ABCDE 2014, Washington, D.C.]

Introduction

It gives me great pleasure to welcome all of you to the Annual Bank Conference on Development Economics (ABCDE) 2014.

The first time I attended an ABCDE was when Stanley Fischer used to do my job. A letter arrived, quite unexpectedly, in my Delhi mailbox inviting me to attend the ABCDE in Washington. The World Bank would cover all my expenses and, not just that, I was not given any specific task, like that of writing a paper or commenting on one. Several members of the eminences grises of the profession were at the conference and I remember feeling rather tongue tied. So, taking advantage of the fact that I did not have a specific brief, I hardly spoke during the two days. I later figured that if you measured the World Bank’s expenditure on different participants in terms of the amount spent for each word uttered, I was the most highly-paid person at that conference.

I made up for that a little in 1992, when Larry Summers was the Chief Economist, and I was invited once again from Delhi, this time to comment on Paul Romer’s paper (Romer, 1993). And I will make up for this today, since the Bank did not have to spend on my travel and I do intend to say a few things.

What do we know about preferential trade agreements and temporary trade barriers?

LTD Editors's picture

Two of the most important trade policy developments to take place since the 1980s are the expansion of preferential trade agreements and temporary trade barriers, such as antidumping, safeguards, and countervailing duties. Despite the empirical importance of preferential trade agreements and temporary trade barriers and the common feature that each can independently have quite discriminatory elements, relatively little is known about the nature of any relationships between them. A new World Bank policy research working paper by Chad P. Bown, Baybars Karacaovali, and Patricia Tovar surveys the literature on some of the political-economic issues that can arise at the intersection of preferential trade agreements and temporary trade barriers and uses four case studies to illustrate variation in how countries apply the World Trade Organization's global safeguards policy instrument. The four examples include recent policies applied by a variety of types of countries and under different agreements: large and small countries, high-income and emerging economies, and free trade areas and customs unions. The analysis reveals important measurement and identification challenges for research that seeks to find evidence of systematic relationships between the formation of preferential trade agreements, the political-economic implications of their implementation, and the use of subsequent temporary trade barriers.

Finance and growth in China and India

Sergio Schmukler's picture

China and India are hard to ignore. Over the past 20 years they have risen as global economic powers, at a very fast pace. By 2012, China has become the second-largest world economy (based on nominal GDP) and India the tenth. Together, they account for about 36% of world population.