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LTD Editors's blog

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

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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.

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

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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.

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

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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.

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

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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.

Friday round up: Syria, Piketty pushes back, Universal Health Coverage, GMOs to fight hunger, and Brazil

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Syria's economy is heading into ruin, warns a Reuters news story based on a new study by the Damascus based-Syrian Centre for Policy Research. Commissioned by the United Nations and the International Monetary Fund (IMF) the study estimates that there was a 40 percent contraction in GDP since the start the conflict in 2011 and two-thirds of the nation's population is estimated to be living in extreme poverty.

Thomas Piketty, author of 'Capital in the 21st Century,' has responded in detail to the FT's recent assertion that his blockbuster book used erroneous computations.

Son preference, fertility and family structure: Evidence from reproductive behavior among Nigerian women

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Strong boy-bias and its consequences for young and unborn girls have been widely documented for Asia. A new World Bank policy research working paper considers a country in Sub-Saharan Africa and finds that parental gender preferences do affect fertility behavior and shape traditional social institutions with negative effects on adult women's health and well-being. Using individual-level data for Nigeria, the paper shows that, compared to women with first-born sons, women with first-born daughters have (and desire) more children and are less likely to use contraceptives. Women with daughters among earlier-born children are also more likely to have shorter birth intervals, a behavior medically known to increase the risk of child and maternal mortality. Moreover, they are more likely to end up in a polygynous union, to be divorced, and to be head of the household. The preference for sons is also supported by child fostering patterns in which daughters are substitutes for foster girls, while the same does not hold for sons and foster boys. These results can partly explain excess female mortality among adult women in Sub-Saharan Africa.

Cash transfers and temptation goods: A review of global evidence

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Cash transfers have been demonstrated to improve education and health outcomes and alleviate poverty in various contexts. However, policy makers and others often express concern that poor households will use transfers to buy alcohol, tobacco, or other "temptation goods." The income effect of transfers will increase expenditures if alcohol and tobacco are normal goods, but this may be offset by other effects, including the substitution effect, the effect of social messaging about the appropriate use of transfers, and the effect of shifting dynamics in intra-household bargaining. The net effect is ambiguous. A new paper by David K. Evans and Anna Popova reviews 19 studies with quantitative evidence on the impact of cash transfers on temptation goods, as well as 11 studies that surveyed the number of respondents who reported they used transfers for temptation goods. Almost without exception, studies find either no significant impact or a significant negative impact of transfers on temptation goods. In the only (two, non-experimental) studies with positive significant impacts, the magnitude is small. This result is supported by data from Latin America, Africa, and Asia. A growing number of studies from a range of contexts therefore indicate that concerns about the use of cash transfers for alcohol and tobacco consumption are unfounded.

​Friday Roundup: Tackling Inequality, Ushahidi on crisis data, Technology and Africa, Gates on Sachs, and ABCDE sign up

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Ana Revenga, soon to be the head of the Bank's Poverty Global Practice, blogs on the importance of starting early when tackling inequality and also links to a new user-friendly inequality dashboard.

From his days as an MIT professor, to his stint as World Bank Chief Economist, #2 at the IMF, and head of Israel's central bank, Stan Fischer is a towering figure in economics circles. He's just been appointed by Fed Chairwoman Janet Yellen to be her deputy. Read Dylan Matthew's profile of Stan here.

Urbanization as opportunity

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Urbanization deserves urgent attention from policy makers, academics, entrepreneurs, and social reformers of all stripes. Nothing else will create as many opportunities for social and economic progress. The urbanization project began roughly 1,000 years after the transition from the Pleistocene to the milder and more stable Holocene interglacial. In 2010, the urban population in developing countries stood at 2.5 billion. The most important citywide projects -- successes like New York and Shenzhen -- show even more clearly how influential human intention can be. The developing world can accommodate the urban population growth and declining urban density in many ways. One is to have a threefold increase in the average population of its existing cities and a six fold increase in their average built-out area. Another, which will leave the built-out area of existing cities unchanged, will be to develop 625 new cities of 10 million people -- 500 new cities to accommodate the net increase in the urban population and another 125 to accommodate the 1.25 billion people who will have to leave existing cities as average density falls by half.

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