Published on Development Impact

Weekly links October 20: the political economy of low African labor productivity, space economics, save for a prize, and more…

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·       Ken Opalo discusses how falling labor productivity is part of the issue behind a two-decade economic slump in African states, and his diagnosis of the problem “the political economies of most African states militate against the growth of jobs-heavy domestic manufacturing….African elites’ struggle to protect their own property rights, even while in power. With a few exceptions, most elites seldom accumulate easily visible and attributable wealth — for example through the ownership of productive large firms that generate mass employment. The dominant mode of accumulation is to secretly stash wealth abroad or hoard millions of dollars in cash outside of the banking system…addressing Africa’s productivity slump will require structural reforms to entrench elite property rights in a manner that promotes domestic commercial revolutions in the region. In addition to being in a position to positively influence industrial policy in the direction of mass job creation and anchor foreign direct investments, investors with socio-political skin in the game are also less likely to run away with their capital during economic downturns.Under the circumstances, the region has historically been hostile to would-be independently successful businesspeople. Such businesspeople tend to be viewed by incumbents as potential political challengers that ought to be cut to size.”

·       On VoxDev, Gertler and co-authors look at the impacts of offering prize-linked savings accounts in Mexico. “We randomly assigned 40 out of 110 bank branches across 19 states to offer PLS over a two-month period. We then measure the effects on account openings, deposits, and savings over the subsequent five years…every 50 pesos (US$4) of new savings earned people one lottery ticket. The bank awarded one thousand small prizes of 400 pesos (US$31) and two large prizes of 10,000 pesos (US$777) at the end of each lottery month…Offering PLS increased the number of accounts opened by 36% in treatment branches relative to control branches over the two-month lottery incentive period…Right after the incentive ended, the treatment effect fell to zero… the flow of new deposits remained higher in treated branches for about 3 years after the incentive. This persistent increase in the number of deposits caused the stock of savings in treatment branches to increase steadily over time”

·       Also on VoxDev, Wayne Sandholtz looks at the electoral effects in Liberia of improving school test scores through management by a private school provider: “voters near treated schools were significantly less likely to vote for the incumbent party…The negative electoral effects were heavily driven by the places where the policy disengaged teachers most. This suggests that teachers play an important persuasive role with voters and alienating them can be electorally costly.”

·       On the 100% CI, a nice illustration of some of the issues with psychological constructs, and especially those catchy studies that try and look at the bright side and the dark side of something like narcissism, perfectionism, striving for happiness, etc – with a humorous example involving chocolate.

·       On Liberty Street Economics, the blog of the NY Fed, Amiti and co-authors summarize their work on the positive productivity spillovers that large firms generate to their domestic suppliers. “by three years after the event, firms located in Belgium that started selling to a superstar firm enjoyed around 7 to 8 percent higher TFP than the control group” – note this is based on event study work, and shows parallel trends for their selected control group before hand, but we still might worry about dynamic selection into being a supplier.

·       Did you really want to be an astronaut but ended up an economist? Never fear, the field of space economics may be for you – a PNAS special feature overviews the emerging evidence and agenda on how space exploration can affect economic growth on Earth and deals with topics like “the economic impact of space investment, innovation-inducing organizational design, competition and optimal use of common pool resources, the potential for cleaner green transitions, and answers to secular stagnation”

·       Funding call for proposals: The IPA and J-PAL Displaced Livelihoods Initiative (DLI) has a call for proposals to generate new evidence on livelihoods programs for displaced populations and host communities. They welcome proposals for full impact evaluations, pilot studies, exploratory work, infrastructure and public goods creation, and scaling support across several broad areas including:  Resilience; Entrepreneurship; Wage employment ; Social cohesion, inclusion, and norms; Rights and regulations. Short Expressions of Interest are due November 22, 2023, and full proposals are due January 19, 2024.


David McKenzie

Lead Economist, Development Research Group, World Bank

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