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August 2013

How to Avoid Middle Income Traps?

Ejaz Ghani's picture

With Aaron Flaeen and Saurabh Mishra

Many developing countries have successfully made the transition from low-income to middle-income status, thanks to rapid economic growth, but have subsequently got stuck in a middle income trap. A great deal of research has been done on what explains much faster growth in the developing world than in the developed world (Acemoglu et al 2011; Baldwin 2011; Commission on Growth and Development 2008; Rodrik 2013; UNIDO 2011). But little is known about why so few countries succeed in making the transition from middle-income to high-income status (The Economist, 2013). This is a worrying trend and an issue of major concern, especially because the majority of poor people now live not in low-income but in middle-income countries (Chandy and Gertz, 2011; Sumner and Kanbur, 2011). So what is a middle income trap? What should policy makers do?

We have examined these questions in the context of Malaysia, whose structural transformation from low to middle income has made it one of the most prominent manufacturing exporters’ in the world. However, in a competitive global economy, like many other middle-income economies, it is sandwiched between low-wage economies on one side and more innovative advanced economies on the other.

Climate Drum Roll...We Need Your Votes Now!

Milica Begovic's picture

Our idea (UNDP Montenegro) - helping families legalize their homes using savings from energy efficiency measures - was voted as one of the finalists in the MIT ClimateCoLab crowdsourcing competition for the world’s most innovative solutions to climate change problems.  Ours was one of 374 proposals in 18 categories.
 
What happens now? From August 1st to August 31st, the crowd will vote for the best among the best- the ideas they think should receive support for implementation
 
So vote for us here and help us become the People’s Choice Award.  In addition to potentially winning a $10,000 Grand Prize, we will have a chance to pitch it to a variety of potential partners at the MIT Crowds and Climate Conference in November. 
 
To make sure that you know you’d be giving a vote to more than just a promising idea, we’ll give you a sneak peak at some of the feedback we got from a very eminent set of experts and authorities in climate-related fields:

Do Matching Grants Programs Increase Firm Productivity and Growth?

Miriam Bruhn's picture

Matching grant programs are one of the most commonly used policy tools for boosting productivity and technological upgrading in small firms. A matching grant typically consists of a partial subsidy to a firm for the use of business development services, such as management consultants or technical experts.

Despite their common use, there is currently little evidence as to whether or not matching grants actually improve firms’ productivity and growth prospects. One worry is that the money may simply be used for services that the firm may have hired even without a subsidy. Together with Dean Karlan and Antoinette Schoar, I conducted a randomized impact evaluation in Mexico that is among the first to document the positive effects of a matching grants program.

Giving the Poor What They Need, Not Just What We Have

David Evans's picture

Recently, this blog discussed a study on cinematic representations of development, highlighting notable films such as Slumdog Millionaire and City of God. Over the weekend, I was reminded that even forgettable films can underline key development lessons. In The Incredible Burt Wonderstone, a professional magician engages in international charity work. He explains, “I go to places where children have neither food nor clean water, and I give them magic,” as he passes out magic kits in an unidentified low-income rural community. A journalist asks, “Do you also give them food and clean water?” “Well, no. I’m a magician. I bring magic.” Later, his endeavor failed, the magician returns to the United States and meets an old friend:

“What about the poor?”
“Turns out they didn’t want magic: They just wanted food and clean water.”
“Ugh. Fools!”
 

The Incredible Burt Wonderstone

Can cities be publicly traded?

Rana Amirtahmasebi's picture


The Charging Bull, a Wall Street symbol (Credit: Epyonmx, Flickr Creative Commons)

Apparently so.
 
The city of Nashville can now be bought and sold on the New York Stock Exchange.  Well, that is an overstatement.  More accurately, as of the opening bell on August 1st, the Nashville Area ETF (Exchange-Traded Fund) was listed on the New York Stock Exchange as NASH for about $25 a share. This is the first time that a city-based ETF has been developed.

Do Relationships Matter? Evidence from Loan Officer Turnover

Alejandro Drexler's picture

One of the most frequent causes of credit constraints is the presence of asymmetric information between businesses and investors. Asymmetric information is particularly problematic for micro-entrepreneurs where the information about cash flows and investment decisions is not formally recorded. Furthermore, micro-entrepreneurs many times have few assets to pledge as collateral and do not have a guarantor with a solid financial condition, making it even more difficult for them to access the credit market.

Microfinance institutions specialize in lending to these types of borrowers and have lending technologies that do not rely on formal records. Instead, revenues and expenses are estimated based on non-verifiable information collected by loan officers during field visits to the borrowers’ houses and businesses.

How will Development be Financed? The Eclipse of Aid, and What It Means for Post-2015

Duncan Green's picture

Thanks to Alex Evans for recommending ‘Who Foots the Bill’, a report from the ODI’s Romilly Greenhill and Annalisa Prizzon on trends in development finance. It was published at the end of last year, but somehow I missed it – probably because it is pegged to funding the post-2015 goals, a timesuck discussion I have tried to avoid (without much success).

But actually its value goes way beyond post2015. Here are some highlights:

Conclusions on Financing for Development:

Quote of the Week: Luiz Inácio Lula da Silva

Sina Odugbemi's picture

“When talking with young leaders in Brazil and elsewhere, I like to tell them this: Even when you are discouraged with everything and everyone, don’t give up on politics. Participate! If you do not find in others the politician you seek, you may find him or her in yourself.”

- Luiz Inácio Lula da Silva. A Brazilian politican who served as president of Brazil from 2003 to 2011.
 


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