The recent gang rape in India alarmed all countries in South Asia. A 23-year-old woman was gang-raped by five men on a bus in New Delhi. Some of the offenders had jobs (bus driver and assistant gym instructor) and one was a juvenile. The victim failed to survive the trauma. This incident resulted in a public outcry for justice, and the media still report statements exposing public officials who are insensitive and lack awareness of the social and economic costs of gender-based violence. Do we have to wait for such a violent incident to occur to start acting?
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.
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
What impact do remittances have on stimulating overall economic growth? Remittances can be used for consumption and investment which further stimulates demand for goods and services, as well as contribute to financial development. On the other hand, they can create dependence in recipients and cause real exchange-rate appreciation which adversely affects domestic production.
The answer is an empirical one which we can answer using available data. Our findings echo recent economic research which shows that remittances, even when not invested directly, can have an important multiplier effect.
In our study, we focused only on the magnitude of the impact of remittances on aggregate demand in Bangladesh and calculated the traditional Keynesian multiplier effect, that is how much income is generated from every remittance dollar, following the approach adopted by Nicholas Glytsos by estimating a consumption function, an investment function, and an imports function. To estimate the parameters we used data from the Bangladesh Bureau of Statistics national accounts covering the period 1981-2010. We ran simple Ordinary Least Squares regressions to estimate the structural parameters. Here is a summary of our results:
"Semiconductor Co." is a global microprocessor and chipset manufacturer, with production facilities, suppliers, and customers around the world. However, all markets are not created equal. Some customers are easier to reach than others. When it comes to exporting to India, for instance, its products are frequently held at customs for weeks, and sometimes even pilfered from warehouses monitored by customs.
According to the World Bank’s Doing Business report, it takes 32 days on average to complete trade-related procedures in South Asia, among the highest in the world. Nearly 70% of the time is spent on assembling and processing an odious number of documents.
At the 9th South Asia Economics Students' Meet on Green Growth, participants shared their vision about South Asian cities of the future. These are their innovative ideas.
South Asia, home to 1.3 billion people, houses some of the world's largest cities: Delhi, Dhaka, Kolkata, Karachi and Mumbai. As urbanization increases, the region will experience a hike in demand, consumption and production. Today, in Bhutan, 34% of the population still lives without electricity. With urbanization and development, carbon emissions from electricity generation and usage are bound to rise. Historically, it can be seen that the more developed a country, the greater its carbon emissions; USA's and Canada's drastic emission rates corroborate this. Although South Asia currently contributes much less to the carbon footprint than the more developed nations of the world, it is imperative to plan development so as to reduce its impact on environment.
Why do migrants send money back home? Distinguishing the different motives helps us understand the role these transfers play in influencing the behavior of households, and the policy implications of alternative motives can be very different.
I tried answering this question using micro survey data from Bangladesh on possible motivations, using a multivariate regression model.
The results were a little unexpected. Overall, the evidence contradicts the argument that remittance-receiving countries have little scope for policy intervention. The analysis shows that remittances are not driven exclusively by the need for family support but also by the migrants’ skill and education level and motivation to transfer their savings as investment in their home country. Thus, contrary to conventional wisdom, remittances play a vital role in not only supporting consumption but also in serving as an important source of investment funding. The extent to which remittances contribute to investment depends on the supportiveness of government policies and whether the economic environment is conducive to investment activity.
Surprisingly, none of the demand side variables—the existence of a surviving parent or spouse—seem to matter. Among the supply side variables, education and skill matter most.
Remittances sent by migrant workers have emerged as a key driver of poverty reduction in many developing countries. Bangladesh has caught up with growing migration trends since the mid-70s when only 6,000 Bangladeshis were working abroad. Today, there are about 8 million. Migration has now become a major source of gainful employment for Bangladesh’s growing number of unemployed and under-employed labor force. The sharpest increase in the level of manpower exports occurred during 2006--2009. Remittances have grown at a rapid pace, particularly since 2004.
So, what are the key correlates of aggregate remittance inflows in Bangladesh? What does the data tell us about Bangladesh? Many researchers have used aggregate data to analyze the macro-economic factors affecting the behavior of remitters. For example, Barua et al (2007) show that income differentials between host and home country and devaluation of home country currency positively and high inflation rate in home country negatively affect workers’ remittances1. Hasan (2008) finds remittances respond positively to home interest rate and incomes in host countries2. Ordinary Least Squares estimation is frequently used to characterize the statistical relationships between aggregate remittance inflows and their proximate macro correlates.
The key finding is that a limited number of macroeconomic factors are important in predicting the behavior of aggregate remittances.
This is the sixth and last in a series of posts about the recent report, Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth. The previous post looked at what sort of policies it will take to achieve the goal of middle income status by 2021.
Bangladesh, one of Asia’s youngest countries, is poised to exploit the long-awaited “demographic dividend” with a higher share of working-age population. Labor is Bangladesh’s strongest source of comparative advantage, and Bangladesh’s abundant and growing labor force is currently underutilized. Absorbing the growing labor force and utilizing better the existing stock of underemployed people requires expansion of labor-intensive activities. And that means expanding exports, as domestic consumption offers limited opportunities for specializing in labor-intensive production.
What are the potentials for expanding exports? Bangladesh’s competitors are becoming expensive places in which to do business. In the next three to four years, China’s exports of labor-intensive manufactured goods are projected to decline. It will no longer have one-third of the world market in garments, textiles, shoes, furniture, toys, electrical goods, car parts, plastic, and kitchen wares. Capturing just 1% of China’s manufacturing export markets would almost double Bangladesh’s manufactured exports.
When the winners of the World Bank’s "Imagining Our Future Together" art competition first met last fall, the atmosphere was very much like the first day of school: Everyone was new, excited to meet others, and optimistic about possibilities ahead. As the exhibition of their art comes to World Bank headquarters next week and the 25 young artists prepare for their third and final meeting, their collaboration has accomplished more than we organizers ever imagined.