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February 2013

Shocks Hit Workers Twice In Offshoring Industries: Lessons From Mexico

Daniel Lederman's picture

Factory in Mexico. Source: Alan Grinberg -- http://www.flickr.com/photos/agrinberg/5536586224/The world is increasingly interconnected, and nowhere is a better example of that than the border between Mexico and the US. Lined with factories, the division between the two countries is blurred by a comprehensive trade agreement, international production chains, and other economic and social ties. On the Mexican side of the border, close to 3,000 factories import components and raw materials, workers assemble goods, and most of the finished products are destined for the US.

Is this good for Mexican workers? These export-oriented industries provide nearly two million jobs, a boon for development. But it turns out that these jobs can disappear quickly: the economic health of the US has a large impact on Mexican workers’ employment status, with downturns and booms amplified through a number of channels. Although the US economy is rarely volatile, this is an important finding that could have policy implications around the world. Mexico is similar to the increasing number of countries that have encouraged export-oriented industry as a strategy for development and enacted trade reforms integrating the local economy with the world market.

Inclusion is No Illusion

Zahid Hussain's picture

The World Bank’s recent report Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges examines inclusiveness along three dimensions—poverty, inequality, and the distribution of economic opportunities. The findings are summarized in this post.

Economic growth in the last two decades in Bangladesh has been pro-poor. Poverty declined significantly from 58.8 percent in 1991/92 to 31.5 percent in 2010. Bangladesh succeeded in “bending the arc of poverty reduction” in the decade ending 2010, a period in which the number of poor declined by around 15 million, compared with a decline of about 2.3 million in the preceding decade. There has also been regional convergence in poverty patterns during 2005-10. Poverty reduction in the lagging Western divisions (Rajshahi, Khulna, and Barisal) was larger than in the Eastern divisions. A number of other indicators of welfare also show notable improvements between 2000 and 2010 for the general population and the poor alike.

Income distribution stabilized after deteriorating in the 1990s. While comparisons based on consumption data have been used to argue that inequality in Bangladesh is low by international standards, when income rather than HIES consumption data are used, inequality appears to be much higher. The degree of income inequality was reasonably low and stable compared to countries such as Malaysia, Thailand and Philippines during the 1970s and 1980s. But there was a sharp increase between 1991-92 and 1995-96. Gini consumption concentration ratios based on HIES 2000, 2005, and 2010 data were almost unchanged while Gini income concentration ratios increased by 3.5 percent during 2000-05 followed by 1.9 percent decrease during 2005-10. The good news is it has been a race to the top in the past decade with consumption growing for the poor and non-poor alike. However, income inequality in Bangladesh is relatively high. Among Bangladesh’s peer group of countries only Sri Lanka has a higher income Gini and Cambodia is close.

Bridging the Gender Gap: Empowering India’s Female Entrepreneurs

Mabruk Kabir's picture

A quiet revolution has been sweeping the Indian political landscape. Last year, the reservation (quota) for women in panchayats — rural local self-government — was increased to at least 50 percent, bringing women into the political fold in vast numbers.

However, economic empowerment may not have kept pace with political empowerment. When it comes to female labor force participation, gender disparities remain deeply entrenched. The 2012 World Economic Forum's Gender Gap Index ranked India 123rd out of 135 countries on economic participation and opportunity.

Is there an answer to our energy needs blowing in the wind?

Tracy Hart's picture
      World Bank

When I was a graduate student, I often drove through the Altamont Pass wind farm. I thought of them as the California’s equivalent of Dutch windmills, more beauty than function. Little did I know that it was one of the first, and largest, wind farms in the United States and that I would someday learn more about their value and potential.

Fighting poverty in the Arab world: with Soap Operas?

Amina Semlali's picture
        Photo Source: Nasib Albitar

If you think you are immune to the lure of a soap opera then try watching an Egyptian soap. At first, you will be amused and perhaps even laugh at all the melodrama, but in the end you will most certainly find yourself wondering: Will Alia expose her evil twin sister? Will Omar learn how to read, propose to his beloved and be accepted by her upper-class family?

Quote of the Week: David Fincher

Sina Odugbemi's picture

“No movie is made with the intention of losing money. The ones that are good are as much a by-product of luck as they are of effort. You’re running around a field with a jar trying to catch lightening.”

- David Fincher, an American Film and Music Video Director.
As quoted in the Financial Times, February 1, 2013. Lunch with the FT: David Fincher.

Exits from the Debt Trap? India’s Bailout for Highly-Indebted Rural Households

Martin Kanz's picture

Extreme levels of household debt are common across the developing world. This is especially true in rural economies, where households face significant income volatility, but lack access to basic financial tools — such as insurance or futures contracts — that could reduce vulnerability to recurring income shocks.

In India, where over-indebtedness among rural households has been an important issue for decades, the government resorted to an unusually bold policy response. Prompted by a highly visible increase in farmer suicides, most notably in the Vidarbha region of Maharashtra, and a wave of defaults among microfinance borrowers, the Government of India embarked on what was perhaps the largest household level debt relief program in history. Announced in then finance minister Pranab Mukherjee’s budget speech on February 28, 2008 India’s Agricultural Debt Waiver and Debt Relief Program for Small and Marginal Farmers, cancelled the outstanding debts of 45 million rural households across the country, amounting to approximately 1.7% of India’s GDP.

Friday Roundup: Intergenerational Mobility; Trade and Poverty; India’s Trading Partners, and UHC

LTD Editors's picture

Gary Solon’s work on “Intergenerational Income Mobility in the United States,” not only questioned the previously existing consensus of highly mobile American households, but also concluded that the correlation between a father’s earnings and his son’s might be at least 0.4 or higher. Years after his work, new studies have been emerging and suggest that the 0.4 correlation might be a bit too optimistic. In this vein, how can we tackle the issue of  inter-generational social immobility? The Free Exchange blog has enlisted Miles Corak, Gregory Clark, and World Bank’s Francisco Ferreira to comment on the field. Read the summary and expert remarks here.

There is often talk about how trade harms the poor, especially in closed economies. However, evidence suggests otherwise. In a recent World Bank Policy Research Working Paper, Raju Jan Singh and Maelan Le Goff find that, trade does tend to reduce poverty, in specific settings. Read Raju’s blog post to know more.

Please use -but don't abuse- Tanzania’s forests

Waly Wane's picture

Let's think together: Every Sunday the World Bank in Tanzania in collaboration with The Citizen wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a few questions.

Globally, forests are disappearing at an increasing rate. Since 1990 alone, half of the world’s rainforests have vanished. Tanzania also has been severely affected by deforestation as illustrated by the following statistics:

- Forest area as a share of total land area declined from 50 per cent to 43 per cent to 37 per cent from 1938, to 1987 and 2010 respectively.

Researcher Q/A: Can Early Nutrition Boost a Child’s Economic Future?

Aliza Marcus's picture

It is well-documented that prenatal nutritional supplements can give children the right start in life by supporting development in-utero and improving birth-weight, which reduces infant mortality. But can a case be made that good nutrition early on will give children a measureable earnings boost years later?


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