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February 2013

Evidence That Trade Does Reduce Poverty, But Only If the Conditions Are Right

Raju Jan Singh's picture

Market negotiations. Source: Raju Jan Singh/World Bank.While most economists accept that, in the long run, open economies fare better in aggregate than do closed ones, many observers fear that trade harms the poor. African countries, for example, have experienced significant improvements in trade liberalization in recent decades. But Africa remains the poorest continent in the world. It seems that the large gains expected from opening up to international economic forces have been limited in Africa, especially for poor people.

So does trade reduce poverty? In a recent World Bank Policy Research Working Paper, my colleague Maëlan Le Goff and I examine this question, looking at the connection between poverty and trade liberalization in 30 African countries between 1981 and 2000. Our results suggest that trade does tend to reduce poverty, but only in specific settings: in countries where financial sectors are deep, education levels high, and governance strong.

Quote of the Week: Andre Geim

Sina Odugbemi's picture

“We are in the midst of a technology crisis. Disruptive technologies now appear less frequently than steady economic growth requires. Even bankers complain about a dearth of new technologies in which to invest.”

Andre Geim, 2010 Nobel Prize Winner for Physics and Research Professor at the School of Physics & Astronomy, University of Manchester

A quote from the article, Be afraid, be very afraid, of the world’s tech crisis, Financial Times, February 6, 2013

Financial Inclusion in Fragile and Conflict-Affected States

Asli Demirgüç-Kunt's picture

Those who live in fragile and conflict-affected states face limitations that most of us simply cannot comprehend. Not only do the larger cycles of conflict and insecurity often lie beyond the control of individual adults, but the weak institutions that characterize these economies also severely restrict the opportunities for adults to manage their risks and improve their own lives. Amartya Sen has written that the central aspect of well-being is 'functioning,' defined as the freedom of choice and control over one's life. For adults living in fragile and conflict-affected states, the inability to smooth consumption and make investments through formal savings and credit systems is one of many restrictions on their 'functioning'.

Just 15 percent of adults in these economies have an account at a formal financial institution, compared to 24 percent, on average, in low-income countries and 43 percent in the rest of the developing world. This is the cruel paradox of financial inclusion in fragile and conflict-affected states: it is in precisely these countries that having a safe place to save or a reliable method to receive remittances is most important, yet access to and usage of basic financial services remains incredibly low.

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Does gender matter in migration? Why I don’t believe any studies which claim it does

David McKenzie's picture

Since I’ve had three emails in one week asking me about this issue, I figured I might as well blog about it and have something to refer people to instead. The questions have all been variants of:

·         Are women better remitters than men?

·         Does having mothers migrate result in worse outcomes for kids than having their fathers migrate?

Get the Conditions Right for Remittances to Matter

Zahid Hussain's picture

Recent evidence suggests that remittances have a positive impact on economic growth. This post will examine evidence based on an international panel data set that captures the surge in migration and remittances observed during 2006-09. The dataset includes 70 countries spanning from 1990 to 2009. This to our knowledge is the most recent data set that has been used in empirical remittance work. The recent effort of countries to decrease money laundering, use of improved technology and decrease in transaction costs is leading to a decrease in the unofficial portion of remittances. There has also been a surge in migration and remittances in the last half of the past decade. Thus this dataset should more comprehensively capture the growth impact of remittances compared to previous studies. Different models used to calculate the impact of remittances on growth are detailed in the report titled Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges, Volume II, Main Report, published in June 2012.

The impact of remittances on per capita GDP growth is economically significant

Like the Kumbh, Every Day

Onno Ruhl's picture

Kumbh Mela at the banks of Ganga,( photo by: Martje van der Heide)

When we got closer I saw that the bridge at the confluence was not a bridge:  It was a line stitched together from hundreds of little boats full of people.  Our own little boat went straight for it and docked at what looked like a slightly more important boat.  I then realized this was the place to take a dip…

It is time for the Arab world to invest in people not subsidies

Hana Brixi's picture
        World Bank

Governments in the Arab world have historically relied on subsidies to lower the cost of fuel and food as the principal means for protecting the poor and sharing wealth. Or so they claim. The fundamental problem with subsidies is that they benefit the rich far more than the poor. They are as expensive as they are inefficient, failing to deliver any economic or social value equal to the money spent on them.

Nepal Youth Pictures Inequality, Wins Photo Contest

Ravi Kumar's picture

Available in Español, Français

Nepal Youth Pictures Inequality, Wins Photo Contest

Among the evocative winning photos in the World Bank’s recent “Picture Inequality” contest was one that hit home for me.

It shows a skinny teenager crushing stones so they could be used to construct gravel roads in Nepal. The picture captured the sense of helplessness many youth feel in Nepal, a landlocked country in South Asia that is struggling to recover from a decade-long civil war. And it brought to mind the saying a photograph is worth a thousand words.

The photographer, Niraj Prasad Koirala, 24, of Nepal, was one of 10 winners whose photographs and statements best captured inequality and described how they would make a better world. Koirala’s photo was one of 11 chosen by a panel of experts from 756 photos received between October 25 and December 16, 2012. 

"I was very happy when I got to read the winning message from the World Bank. It was my one of the greatest moments in life," says Koirala.

Talking to the UN Security Council about Climate Change

Rachel Kyte's picture

Flags at the United Nations. UN Photos

This morning, I had the honor of speaking to the UN Security Council about an increasingly dangerous threat facing cities and countries around the world, a threat that, more and more, is influencing everything that they and we do: climate change.

World Bank President Jim Kim is in Russia right now talking with G20 finance ministers about the same thing – the need to combat climate change. Every day, we’re hearing growing concerns from leaders around the world about climate change and its impact.

If we needed any reminder of the immediacy and the urgency of the situation, Australia Foreign Minister Bob Carr and our good friend President Tong of Kiribati spoke by video of the security implication of climate effects on the Pacific region.


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