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The Poor Half Billion--what is holding back lagging regions in South Asia?

Ejaz Ghani's picture

South Asia presents a depressing paradox. It is among the fastest growing regions in the world. But it is also home to the largest concentration of people living in poverty. While South Asia is at a far more advanced stage of development than Sub-Saharan Africa, it has many more poor people than Sub-Saharan Africa.

Figure 1: Number of Poor People has increased in South Asia

Source: World Development Indicators, World Bank 2009.          
Note: Number of people living on less than US$1.25 a day at 2005 international prices. South Asia includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. East Asia Pacific includes China.

Four cheers for the “results agenda"

Adam Wagstaff's picture
Photo © Dominic Sansoni / World Bank

The development community hasn’t exactly only just woken up to the fact that development is about achieving something. Projects have had logframes since time immemorial, showing how project activities and spending are expected to lead ultimately to development outcomes—things that matter to people, like health and learning. But the “results agenda” (an agenda that dates back to 2003 but which seems to be gaining momentum) has the scope to be transformative in at least four ways.

1) Work backwards, not forwards
First, it invites us to work backwards from these things that matter and think about alternative ways to achieving these outcomes. Take education. A lot of projects in the Bank and other development agencies have focused on building and rehabilitating schools, with the expectation that this will lead to higher school enrollments. And yet as my colleague Deon Filmer showed a while ago, proximity to a school has very little effect on the likelihood of a child enrolling in school. By contrast, as he and Norbert Schady showed in another paper, providing scholarships to poor children does increase enrollments.

Choosing countries as models for industrial growth

Justin Yifu Lin's picture

Train station. India. Photo: © Curt Carnemark / World Bank

Shanta’s thoughtful comments on our Growth Identification and facilitation (GIF) paper are most welcome. The issues of industrialization and structural transformation are at the heart of economic development. Following comments already made by my co-author Célestin Monga on this blog, let me offer a few thoughts to this exchange.

First, the GIF approach explains the economic success of a very diverse group of countries: China (with 1.3 billion population), Japan (100 million); Taiwan-China (20 million); Korea (40 million); Singapore (5 million); or Mauritius (400.000). The framework has also been applied in large Western countries such as Germany, France, and United States, and small European countries like Sweden, Norway, Finland, and Ireland. The political systems of those economies are also very different, some are democratic and some are authoritarian.

New Brookings Study is Overly Optimistic on Progress Against Poverty

Martin Ravallion's picture

A new paper by Laurence Chandy and Geoffrey Gertz at the Brookings Institution reports a remarkable acceleration in the pace of progress against absolute poverty since 2005, as can be seen in Figure 1 of their paper (found here). This would be great news if it could be believed, but there are reasons for doubt. 

In “updating” the World Bank’s estimates using the Bank’s PovcalNet site, Chandy and Gertz have relied heavily on forecasts rather than estimates based on new surveys. Household surveys are the only credible method of measuring poverty. The technology has improved, but naturally the data take time to collect and process. We still do not have sufficiently recent surveys for many countries, especially in Sub-Saharan Africa, the region with the highest overall poverty rate. The next edition of the World Bank’s regular three-yearly updates of its survey-based estimates of global poverty measures is scheduled for release later this year, and will go up to 2008, and revise consistently back to 1980.  (Information on the last update can be found here. The paper documenting the methods and testing their robustness can be found here.)   

Growth identification and facilitation – let the debate begin

Célestin Monga's picture
 photo: istockphoto.com

In the famous movie Forrest Gump (1994), which is the story of an innocent man who represents how the world should be, the main character Tom Hanks remembers: “My Mama always said, ‘Life is like a box of chocolates; you never know what you’re gonna get.’” Development economists working on industrial policy should always keep in mind that motherly wisdom and maintain humility in their random quest for the recipe for economic growth.

In a recent paper on ‘Growth Identification and facilitation: The role of the state in the dynamics of structural change,’ Justin Yifu Lin and I have tried to suggest a rational way of looking at the trial-and-error process that successful economic development always involves. In a new post on his excellent blog ‘Africa Can,’ my colleague Shanta Devarajan welcomes our work but asserts that we gloss over the politics that underlie efforts by governments to guide certain industries toward success.

Whither the development agency’s flagship report?

Adam Wagstaff's picture

The Economist carried a couple of stories recently about how two hitherto major institutions in my home country (newspapers and pubs) have been forced to adapt in the face of changes in public preferences. Many didn’t—as a result newspaper circulation and pub numbers have both fallen dramatically. The newspapers and pubs that did survive operate very different business models from the newspapers and pubs in existence even 10 years ago.

Some data I’ve assembled make me wonder whether—like the newspaper and pub—the development-agency flagship might not also be an institution in need of reform.

The flagship

Most big development and international agencies have a flagship. The World Bank launched its World Development Report in 1978. The IMF’s World Economic Outlook started two years later. The UNDP launched its Human Development Report in 1990, and WHO followed with its World Health Report five years later. Several other UN agencies have annual or periodic flagship reports too.

China, the US and clean energy cooperation

Justin Yifu Lin's picture
 Photo: istockphoto.com

Presidents Hu and Obama created buzz earlier this week in Washington when they met on pressing bilateral issues, including US-China business and investment regulation, trade, currency imbalances and security concerns. US-China clean energy cooperation is an important part of that bilateral dialogue (see transcript of my intervention at a January 18 US-China Strategic Forum hosted by Brookings).

Why?
Cooperation between the two countries can yield big economic benefits.  The world is recovering from the worst economic crisis since the Great Depression. In this context, taking advantage of clean energy opportunities is crucial to fueling a sustained global recovery. 

Of Dark Matter and Domesday

Kirk Hamilton's picture

As surprising as it may seem, there is a deep dark secret at the core of the System of National Accounts (SNA) – the accounts used by Finance ministries worldwide to measure economic performance. The numbers don’t add up. We can see this in the table below, showing the net worth of Brazil and its composition in 2005. The final two lines in the table report a measure of Brazil’s net national income and the implicit rate of return on wealth (the ratio of income to net worth). The return to Brazil’s produced and natural capital is over 18%! As good economists, we should all be investing our pension funds in Brazil. Why? Because financial market data tell us that the long run real rate of return across the broad range of assets averages only about 5% a year.
 

Table – Net worth and net national
Income (NNI) in Brazil, 2005, $million
Produced capital  1,909,259
Natural capital 1,713,939
Net financial assets -117,221
   
Net worth 3,505,978
   
Adjusted NNI 636,356
Implicit rate of return 18.2%
Source: The Changing Wealth of Nations
World Bank (2011)

 

The (gradual) democratization of development economics

Adam Wagstaff's picture

We’ve read a good deal recently about the democratization of research. UNESCO’s Science Report 2010 showed a growth in the developing-country share of science research. As UNESCO Director General Irina Bokovo put it in her Foreword:

 Photo: istockphoto.com

“The distribution of research and development (R&D) efforts between North and South has changed with the emergence of new players in the global economy. A bipolar world in which science and technology (S&T) were dominated by the Triad made up of the European Union, Japan and the USA is gradually giving way to a multi-polar world, with an increasing number of public and private research hubs spreading across North and South.”

The global economy ushers in new phase of recovery, but vigilance is required

Justin Yifu Lin's picture
Photo: © World Bank

Two years after the crisis triggered by the collapse of Lehman Brothers, the world economy has entered a new phase of recovery. Most developing countries have recovered to pre-crisis (or close to pre-crisis) levels of activity and have transitioned from a bounce-back phase to more mature growth.

We estimate in our new online Global Economic Prospects 2011 report that the growth rate for the world economy was 3.9% in 2010 and is likely to be to 3.3% this year, then 3.6 % in 2012.

The GDP growth rate for developing countries was a robust 7 percent in 2010, up sharply from 2% growth in 2009. This year we project the developing world will record GDP growth of 6%, then edge to an estimated 6.1% in 2012. This far outstrips the high income countries, which grew by 2.8% in 2010 and are estimated to growth by 2.4% this year and 2.7% next year.

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