Day two of the 2011 ABCDE conference has just finished and so far, the conference has given me a lot to think about. There seems a growing consensus that high levels of inequality are not conducive to sustained growth and development. At the Development Centre we go beyond this, arguing that societies that are growing rapidly and undergoing significant structural changes could see their growth trajectories compromised unless they put in place policies to help manage the process.
What is less clear is what policies should be employed, and in what order. Given the extensive changes that many countries are experiencing, focusing on inequality or poverty reduction is not enough. Rapid economic growth may be instrumental to reducing poverty, but if large parts of the population get absorbed into the informal sector for example, then these “non-poor” will remain very vulnerable over time.
(Summary of parallel session 10 at the ABCDE, Paris)
This session involved the presentation of three papers. The first looked at the importance of high food prices for poverty in developing countries. The second looked at the optimal policies for an individual country using trade policies to insulate its market from price volatility in the world market. And, the third considered the implications of the policies actually undertaken by developing countries.
The first paper presentation showed that high food prices raise poverty substantially, implying that policy makers in developing countries are right to be concerned. The second showed that—for individual countries—an appropriate response to high food prices appears to be use of export restrictions in exporting countries or reductions in import barriers in importing countries. The third showed that most countries actually respond in this way, but that these actions are collectively ineffective in reducing the volatility of domestic prices. What appears to be needed is to identify policies that can more effectively deal with the problem of food price volatility.
‘Social protection for inclusive development’ is a timely topic. The G20 ‘Seoul Development Consensus (2010)’, identified growth with resilience as a key pillar. Furthermore, the recent prevailing uncertainty (economic, political and environmental) reinforces the needs for measures, such as social protection, to both safeguard as well as promote development. More broadly, a consensus is emerging that social protection is an important instrument in supporting progress towards inclusive growth and the Millennium Development Goals (MDGs), especially in those situations (covariate shocks, imperfect markets) where remittances and other private safety nets might be insufficient (see Nyarko).
The session Social protection for inclusive growth (based on contributions to the European Report on Development 2010) reviews new generation programmes, emphasising reasons for success and failure. It highlights the features which make social protection possible, affordable and feasible even in low-income countries. Evidence presented shows that social protection programmes can mitigate risks and reduce chronic poverty and vulnerability without producing significant distortions or disincentives (Klasen on South Africa). Besides South Africa and the well known cases of Brazil, Mexico, other recent programmes have been effective in reducing poverty and inequality (cf Table 1 and ERD 2010 for evidence).
Recent years have seen growing attention to inequality of opportunity and how processes of economic development are shaped by, and in turn shape, such inequalities. One strand of research has been concerned with the development of methods to quantify the extent of inequality of opportunity as well as the impact of interventions and policies on such inequalities. I am organizing a parallel session on May 30 as part of the ABCDE conference that will present three studies that aim to substantially extend this measurement agenda.
A paper by Dirk van der Gaer will describe recent research that proposes a methodology to evaluate social projects from an equality of opportunity perspective. The approach looks at the effect of a social program on the distribution of outcomes conditional on morally irrelevant characteristics (such as education level and indigenous background). The methodology is applied to evaluate the effects of Mexico’s opportunidades program on children’s health outcomes.
This session started with a brief overview of the project by David N. Weil, one of the directors of the NBER project. Following the overview, results from four sub-projects were presented by the researchers who conducted them. The session was chaired by Augustin K. Fosu of the World Institute for Development Economics Research.
The Project on African Economic Successes is a five-year research endeavor funded by the Bill and Melinda Gates Foundation and administered by the National Bureau of Economic Research. The co-directors of the project are Sebastian Edwards, Simon Johnson, and David N. Weil. The goals of project include informing policy making in Africa and elsewhere, strengthening the research base on African economies, building links between African researchers and those elsewhere, and bringing new researchers to the study of African development. A particular interest of the project, as evidenced by its name, is in things that are going well in Africa. This includes new technologies and industries, successful health interventions, increases in market integration, better functioning institutions, and successful post-conflict transitions. However, having a “success” to report was definitely not a requirement for inclusion in the study.
Skills affect individual and firm productivity as well as countries’ prospects for sustained and faster economic growth. Yet evidence exists that many employers are concerned about skills constraints (see figure below); and that in many countries, unemployment and underemployment among educated youth are a problem.
The following post originally appeared on the OECD Insights blog.
These are momentous days for the OECD and its work on development. Last week, US Secretary of State Hillary Clinton chaired our 50th Anniversary Ministerial Council Meeting, at which Ministers urged the OECD to adopt a comprehensive new approach to development. They gave us a strong mandate to launch a development strategy in line with our member countries’ aim of promoting development worldwide, and of achieving higher, more inclusive, sustainable growth for the widest number of countries. This effort will entail greater collaboration and knowledge sharing, mutual learning, and deeper partnerships with developing countries and other international organisations.
This week, we are co-hosting the ABCDE, joining forces with the World Bank and France in bringing together some of the best and brightest thinkers on development economics. We’re putting into practice our desire to deepen our understanding of the diverse realities and challenges that developing countries are facing in today´s rapidly changing economic landscape.
As I was packing for a trip to the 2011 ABCDE on “Broadening Opportunities for Development” in Paris, I got a call from an old friend: Would I write a blog on how I saw the “impact” of the 2006 World Development Report, which was entitled “Equity and Development”, over the last five years? Since my friend was paying my ticket to Paris, I could not really refuse, but I did tell her that I had heard Esther Duflo was also going to the ABCDE, so I had better not pretend that one could assess the real “impact” of that report on the practice of development economics…
I am glad to reminisce, though! The World Development Report (WDR) 2006, which Michael Walton and I led under François Bourguignon’s guidance, was an attempt to bring issues of distribution back into the core of the development debate. Distribution was central to the concerns of early development economists, from W. A. Lewis and Simon Kuznets in the 1950s, to Ahluwalia and Chenery’s Redistribution with Growth (1974). After an interlude - marked by the onslaught of representative agent models in macroeconomics and by Margaret Thatcher and Ronald Reagan on the global stage – inequality made a tentative return to mainstream economics in the early 1990s. At that time, a number of authors suggested that today’s distribution of wealth (or income) might affect tomorrow’s growth and development prospects, via a myriad pathways: investment capacity, occupational choice, political economy, etc.