RSS feeds from globalization research centers
CGD Publication: Time-Bound Labor Access to the United States: A Four-Way Win for the Middle Class, Low-Skill Workers, Border Security, and Migrants
Time-Bound Labor Access to the United States: A Four-Way Win for the Middle Class, Low-Skill Workers, Border Security, and Migrants4/11/13
The US economy needs low-skill workers now more than ever, and that requires a legal channel for the large-scale, employment-based entry of low-skill workers. The alternative is what the country has now: a giant black market in unauthorized labor that hinders job creation and harms border security. A legal time-bound labor-access program could benefit the American middle class and low-skill workers, improve US border security, and create opportunities for foreign workers.time-bound-labor-access.pdf<> VIEW FULL HTML
Humanitarianism in Haiti: Visions and Practice4/11/13
CGD Senior Fellow Vijaya Ramachandran will be a panelist at this conference. Humanitarianism in Haiti: Visions and Practice seeks to bring together grassroots activists and donors, international NGO workers and theorists to critically assess both the aims of humanitarian and development aid and the efficacy of aid design and delivery. By creating a horizontal space to cut through the sometimes competing agendas of different actors, the conference hopes to foster more honest and practical dialogue. Through these conversations we anticipate capturing a more comprehensive picture of the politics and on-the-ground challenges shaping the reconstruction effort in Haiti, and lay the groundwork for action that more effectively addresses Haitian-defined priorities.
Hosted by the Duke Haiti Lab, the conference will be the highlight of a year of exciting events that merge research, education, and practical applications of innovative thinking for Haiti’s disaster recovery and for the expansion of Haitian studies in the U.S. and Haiti. The conference is an outgrowth of the Haiti Project, a joint Duke-North Carolina Central University class on aid in Haiti. We are grateful to the Bank of America for its generous support of this conference.
Supported by the Mellon Foundation’s Humanities Writ Large grant, the Haiti Lab is one of three Humanities Laboratories based at Duke’s Franklin Humanities Institute.
Click here to learn more about the panelists.
Recent days have brought news of two early CGD staff members excelling in their respective fields.
Today I learned that former CGD post-doc Jeremy Weinstein has received the Annual Karl Deutsch career award from the International Studies Association for the most significant contributions by a scholar of international relations under 40. Jeremy served as staff at the White House National Economic Council after leaving CGD and is now an associate professor at Stanford University. I still refer often to a 2004 CGD report of which Jeremy was the principal author and project manager: Weak States and US National Security. Jeremy's work is a fine example of the contribution a scholar with policy savvy can make to a better world.
Closer to home, another early CGD staff member, Brian Deese, has just moved from the White House National Economic Council to become Deputy Director at the Office of Management and Budget. Brian was a research assistant (and far more than that implies) and a key contributor to the first CGD book published in 2002, Delivering on Debt Relief: From IMF Gold to a New Aid Architecture. Congratulations are in order for Brian, too, though in this case I would add also a wish of good luck with the very tough budget tasks ahead.Authors: Nancy Birdsall View Profile
News broke this Tuesday of agreement between the UK, France, Germany, Italy and Spain to pilot “multilateral automatic tax information exchange.” In France, President Hollande went further – announcing a draft law aimed at ‘moralising’ French public life, as former budget minister Jerome Cahuzac was expelled from the governing party for repeatedly denying the existence of his Swiss bank account. Hollande was explicit about his intentions at a press conference: “tax havens must be eradicated in Europe and worldwide.”
We interrupt this blog to bring you this diversion from your work, entirely in keeping with the ramped-up rhetoric. (h/t @benphillips76)
Rhetoric around shutting down tax havens – most famously, at the 2009 London meeting of the G20 group of nations – is not new. There are two reasons for wariness. First, the language implies that there is a group of jurisdictions which are the problem – so that by implication all others are unblemished. The Financial Secrecy Index, published by the Tax Justice Network and Christian Aid, presents a different point of view: that there is a spectrum of financial secrecy, including major powers as well as the usual suspects, and that we can use a set of objective criteria to consider the relative importance of each in contributing to what is a global problem. Needless to say, G20 nations also feature on the FSI.
The second reason for wariness is of course the absence of appropriate practical steps to follow. And that is why current developments are promising. Rhetoric on shutting down or eradicating anything aside, a multilateral tool for automatic information exchange would be the central element to ending tax secrecy (and with it, the core element of the tax haven offer).
The 5-way agreement announced yesterday is intriguing, however. The question is, why not use the EU Savings Tax Directive which is by some distance the biggest multilateral, automatic information exchange instrument in the world, and in which all these countries participate, and which is being enhanced even as we speak; or the Mutual Administrative Assistance…[name continues for some time but I’ve lost the will]… Convention, which does not mandate automatic exchange but explicitly condones and allows for it, and has a broader than EU membership, so could be the basis for a global auto exchange instrument.
Two thoughts occur.
- Glass half-empty: It’s basically political and pragmatic: the respective governments mainly wanted to be able to announce something, and as they’re all already making this commitment (and accepting any associated compliance costs) in their FATCA agreements with the US, it may have seemed most straightforward simply to agree to the same terms with each other.
- Glass half-full: It’s a bit more considered: recognising that (a) a very great many jurisdictions, including lots of the ‘usual suspect’ havens, are signing up to FATCA with the US, and (b) that the Mutual etc Convention and the EUSTD have their own, rather cumbersome processes for change and for including other countries, perhaps the signatories here decided that having a straight FATCA replica was the best way to create something that could quickly grow: ‘everyone’ has already to meet these terms with the US, so it’s most straightforward just to demand the same multilaterally in a new, specifically-created vehicle; and the absence of cumbersome arrangements may mean the founding group can drive through extension to multiple jurisdictions in a short space of time.
Itai Grinberg, a law prof at Georgetown and formerly a tax man at the Treasury, has a fascinating paper from early last year on the way that different processes do and don’t fit together. Today, the Tax Justice Network welcome the momentum but raise an associated concern that the new process might take the wind out of the sails of the EUSTD reform.
Here’s my worry. In neither case (1) or (2) is there any reflection of the importance of including developing countries in automatic information exchange. Case (2) looks better, again, for this, but in fact there are currently no developing countries among those listed by Treasury as having negotiated bilateral treaties to make FATCA work. (As an aside, it’s also worrying that the FATCA treaty options include a non-reciprocal one: so that countries would not necessarily get any benefit in terms of US transparency from signing up.)
So it’s not clear how quickly developing countries could join. And that is the question that the G8, and perhaps the UK chair in particular, should be asked. And then the ball passes to the G20…Authors: Alex Cobham View Profile
LSE Cities Executive Director Philipp Rode is presenting at the 4th International Holcim Forum for Sustainable Construction, in Mumbai. The forum runs from April 11 to April 13, 2013 and features keynote speeches from leading experts including David Chipperfield and Brinda Somaya.
You can find out more about the event, and watch a webcast of selected sessions, here: http://www.holcimfoundation.org/T1534/4th-forum.htm
Richard Manning was a highly respected chair of the Development Assistance Committee (DAC) - the development committee of the OECD, the rich countries' think-tank. So we should pay attention when he says in the FT that the OECD is
encouraging OECD finance ministries to get away with murder as they seek to massage reported aid upwards at minimum cost.
The definition of aid requires that loans are 'concessional in character' - in other words, that they are not simply commercial loans. There are two problems with this. The first, which Manning identifies in his letter, is that the rules that the OECD applies for measuring whether this test is met are not fit for purpose. Many loans fall with the current test even though they involve no concession. The second problem is that if a loan is regarded as concessional then the whole of the loan, and not just the concessional part (or 'grant element') is counted as aid. So if a government gives a $10 subsidy to a $100 loan to a developing country, then the whole $100 counts as aid.
There is a parallel problem with the way debt relief is counted. If you are not servicing your debts, then your financial position is not improved if I write that debt off my books. The aid value of debt relief should be the value of the debt service payments which are no longer made as a result, not the whole outstanding book value of the loan.
There is a broader case for thinking again about how ODA is defined. This would be an opportunity to address long-standing anomolies, such as the treatment of debt relief, student subsidies, dumping of surplus food, and the choice of countries which are eligible. My own view is that the current definition creates an unhelpful disincentive to invest in global public goods, such as peacekeeping costs or global health surveillance. (Jean-Michel Severino and Olivier Ray discussed this a few years ago in a CGD Working Paper.) But the reason why Manning is outraged about the treatment of loans is that the way the rules are applied is inconsistent with the existing definition of ODA to which OECD countries have signed up. They are not obeying their own rules.
Manning finishes with a striking thought:
If the OECD cannot do a professional job on this, the UN should take over the reporting for international aid flows.
Coming from a former chair of the DAC, that is a comment which should not be lightly dismissed.
Authors: Owen Barder View Profile
CGD Event: The Eighth Annual Richard H. Sabot Lecture: Technology to Leapfrog Development: The Aadhaar Experience
The Eighth Annual Richard H. Sabot Lecture: Technology to Leapfrog Development: The Aadhaar Experience4/22/13
Nandan Nilekani is an Indian entrepreneur and Chairman of the Unique Identification Authority of India (UIDAI) in the rank of Union Cabinet Minister. Prior to this post, Nilekani co-founded and served as CEO of Infosys, an India-based, multinational provider of business consulting, technology, engineering, and outsourcing services. In 2010, Foreign Policy magazine listed him as one of the Top 100 Global Thinkers. Time magazine listed him as one of the 100 most influential people in the world in both 2006 and 2009. In 2006, he was awarded one of India’s highest civilian honors, the Padma Bhushan and was also named Businessman of the Year by Forbes Asia.
Nilekani’s lecture will focus on his experience with Aadhaar, the Unique ID (UID) system the Indian Government is in the process of building. Over 300 million people have been enrolled and the goal is to enroll 1.2 billion residents of India. UID uses multimodal biometrics to solve the most basic of development challenges – identity. It is primarily aimed at ensuring inclusive growth, strengthening equity by providing a form of identity to those in the marginalized sections of society, and enabling better delivery of services and effective governance. Over the next few years a large number of applications by public and private entities are expected to be developed, providing transformational benefits to residents of India.
Nilekani is featured speaker of CGD’s eighth annual Richard H. Sabot Lecture honoring the life and work of Richard “Dick” Sabot, a friend, co-author, and founding member of CGD's board of directors. CGD president Nancy Birdsall will host and serve as moderator for a discussion after the lecture.
A limited number of seats are currently available for this event. Reservations will be accepted until we reach capacity.
As expected, the president’s budget includes a request for Congress to approve US participation in the 2010 IMF quota reform agreement. There’s a very strong case for approving the request, and I’ll simply point you here, here, and here to read it in detail. Suffice it to say, the IMF is a bargain for US taxpayers, promoting growth and stability globally in ways that directly benefit the US economy and often working in support of US strategic interests around the world.
Nonetheless, some are understandably predicting an uphill battle for the IMF request on the Hill. After all, congressional support for an international financial institution (IFI) in today’s political environment? Let alone something obscure like “voice and vote reform” at an IFI with a dollar amount in the billions (however misleadingly) attached to it? Surely, Congress will be indifferent at best, with the potential for some key actors on the Hill being openly hostile.
But for those of us who very much want to see the IMF deal go forward, there’s already some good news to consider. Just a few weeks ago, Congress did in fact approve US participation in voice and vote reform at an IFI. As it happens, this particular IFI resides on the other side of 19th Street, NW.
And while the administration is looking to satisfy its part of the IMF quota deal simply by transferring money Congress already approved in 2009*, US participation in the World Bank’s voice and vote package required entirely new money, to the tune of $278 million in budgetary outlays (over 4 years) and a contingent commitment of over $4 billion for the United States.
With little fanfare, Congress approved precisely these sums for the World Bank agreement in its wrap up of the FY2013 budget last month.
Approval of the World Bank deal comes on the heels of congressional action on an unprecedented recapitalization of all of the multilateral development banks in FY2012, which in turn was accompanied by approval of record-level US commitments to replenishments of IDA and the African Development Fund (the soft loan windows of the World Bank and African Development Bank).
All of these actions belie the notion that today’s Congress is hopelessly gridlocked, hopelessly indifferent to the rest of the world, and hopelessly hostile to multilateralism.
Now that the administration has made a formal request for the IMF package, I hope and expect that the relevant congressional committees will discharge their duties in the form of oversight hearings, meetings with administration officials, and drafting of legislation.
Getting it done won’t be easy. Certainly, approval of the MDB commitments was hard won. But it was won. And that’s why I’m ultimately optimistic about how the IMF will fare in this Congress.
*Importantly, the administration’s budget request asserts a “zero score” position for the IMF package that may or may not be accepted by the Congressional Budget Office or Congress itself. According to Treasury’s budget justification, “the net cost of the proposed IMF legislation is zero, both in terms of budget authority and outlays.” This position is consistent with the historical treatment of US commitments to the IMF over many decades, with the exception of the 2009 commitment to the IMF’s “New Arrangements to Borrow” when Congress for the first time required (over the objections of the administration and many independent observers) that it be scored according to the Federal Credit Reform Act. I’ll avoid the weedy details of that debate here and simply say that there’s a very strong case for sticking with the longer historical treatment when it comes to scoring, and all the more so in this instance where the proposal simply reallocates a portion of an existing US commitment to the IMF – in fact, the very commitment that Congress budgeted for in 2009.
Over 100 countries have adopted national renewable power targets, with particular focus on wind and solar power (WSP). WSP offers many socioeconomic and environmental benefits but it has two major drawbacks: 1) it's comparatively costly and 2) it's not always available when we need it (i.e. intermittency).
While the upfront costs of WSP continue to fall over time, the cost of maintaining power system reliability in the face of intermittency will increase as WSP expands. In South Africa, where the government is pursuing aggressive WSP targets, penetration is expected to reach 30-40% by 2040 (WSP penetration in the U.S. was just over 6% in 2011). Fully understanding the implications of these changes requires heaps of data and new analytical tools.
South Africa and other countries face a common challenge: how to turn laudable aspirations into concrete plans. This is an exceptionally complex task, and it hinges on the question of how and where to deploy WSP. Well-designed deployment strategies can take advantage of natural variability in wind and solar resources across space and time to minimize costs and maximize benefits, while ensuring reliability.
In my current research, I model the expected generating efficiency of onshore wind, photovoltaic (PV), and concentrating solar power (CSP) technologies across South Africa at hourly resolution over a 10-year period and use the data to simulate power sector scenarios for the year 2040. Genetic search techniques are used to identify specific WSP spatial deployment strategies that minimize the cost of reducing CO2 emissions, while maintaining system-wide reliability.
A paper is in the works. Meanwhile, below are examples of the kind of information such analyses can provide. I believe that low-cost data, modeling, and visualization tools could inform early-stage planning in many countries, creating data-driven roadmaps to help coordinate WSP project siting, transmission and infrastructure planning, and demand-side management efforts.
Figure 1: Modeled hourly generating efficiency for utility-scale PV facilities. This animation displays a small subset of hourly results for March 1-3, 2005 between 5AM and 8PM. Understanding the complex behavior of WSP technologies across space and time – and how that behavior interacts with electricity demand and other generating technologies – requires spatiotemporal information derived from high-resolution meteorological data.
The data used to generate these results includes 10 years of hourly, high-resolution solar radiation data from the Satellite Application Facility on Climate Monitoring and synchronized, moderate-resolution meteorological data from NASA's Goddard Earth Observing System (GEOS-5) climate model. Using these inputs, the hourly performance of utility-scale PV systems is modeled using the National Renewable Energy Laboratory's System Advisor Model (SAM) for ~260 sites. Those results are spatially interpolated for each hour, using a universal kriging model with high-resolution global horizontal irradiance as a predictor.
Figure 2: Mean winter-evening (MJJ; 5-8PM) generating efficiency for onshore wind farms in the southwest region. Peak load in South Africa occurs during winter evenings. During this period, the most efficient onshore wind farm sites are expected to operate at only ~30% of capacity, with the best sites located ~130 km southeast of Cape Town. The spatiotemporal behavior of WSP resources during periods of peak demand is particularly important from a system reliability standpoint. Excluded areas (white) are those where terrain or other considerations (e.g. proximity to population, cropland, etc.) are likely to make deployment impossible.
The input data include 10 years of hourly, moderate-resolution wind speed/direction and air density data from NASA's Goddard Earth Observing System (GEOS-5) climate model combined with long-term, high resolution wind speed distributions based on numerical weather modeling conducted by the Wind Atlas for South Africa (WASA) project.
Figure 3: Hypothetical WSP spatial deployment in 2040. The map shows installed capacity by location and technology. This is only an un-optimized “toy” example to illustrate simulation output. The underlying model, however, can utilize genetic search algorithms to identify deployment patterns that minimize the cost of CO2 abatement (or other metrics of interest), subject to reliability, cost, and technical constraints. The model combines assumptions about the quantity, type, and cost of various WSP and conventional technologies with hourly electricity demand and 10 years of hourly WSP generation data to simulate system cost, emissions, and reliability.
Figure 4: Hypothetical mean contribution of different generating technologies to overall supply in 2040, by season and hour. Results reflect the pattern of WSP distribution in Figure 3. The model takes the WSP electricity production implied by a given deployment pattern and adjusts conventional backup capacity to ensure a specified level of system reliability, accounting for hour-to-hour intermittency (over 10 years of data) and the probability of unexpected mechanical failure. Notice the use of gas turbines (OCGT and CCGT) during morning and evening periods (especially in winter) to accommodate for a lack of WSP output at those times.
Given the assumed deployment pattern, wind power generation is strongest during the middle of the day, but the system is most stressed by high load in the mornings and evenings. During early mornings (e.g. 5-8 AM in winter), PV and CSP systems are not yet generating electricity, requiring the use of gas-fired back-up generators. It may be possible to deploy wind farms across space in a way that increases early-morning generation. This could reduce the need for (and cost of) gas-fired back-up capacity. However, such a change might result in lower wind power output at other times, prompting an increase in coal power use and associated CO2 emissions – and possibly increasing the overall cost of CO2 abatement. Detailed modeling and optimization techniques offer the ability to quickly assess such issues and, if possible, identify deployment patterns that ameliorate problems and reduce costs. The complexity of the potential trade-offs is staggering, emphasizing the need to explicitly model systems with an eye towards optimizing critical metrics like the cost of CO2 abatement.
Authors: Kevin Ummel View Profile
President Obama is set to release his FY2014 budget request tomorrow and expectations for foreign aid reform are high. At the top of the list is a widely-anticipated overhaul of US food aid that my colleague Kim Elliott says could be a bipartisan proposal that shakes up the status quo (and saves money and lives, too). Meanwhile, USAID has hinted that the budget will show some reductions in country program areas that either no longer need USAID to continue or were too small to have an impact. The request will also matter for the MCC, which has a record number of countries eligible for compacts but could be facing near record low funding. And I’ll be looking for signs that the budget reflects the president’s global development priorities outlined in the Presidential Policy Directive, including a focus on economic growth and results, leadership in the multilateral development banks and progress on food security. More than anything, I’m hoping the budget request shows a smarter way to rethink US foreign aid than the across-the-board sequestration cuts.
I hope you’ll help us read through the budget request tomorrow and share your views on whether it meets, exceeds or falls short of expectations.Authors: Sarah Jane Staats View Profile
Latin America’s distribution of income and wealth has long been the most unequal in the world—but poverty and inequality have been falling consistently since 2000 in most countries of the region. What has changed in Latin America? Are the region’s governments more committed to equality than in the past? Have their tax and spending policies improved? Which governments are most committed? Which least? What policies and programs have been most effective in redistributing income? Are they sustainable? What is holding Latin America back from faster gains? What --more or less--should governments be doing?
As a follow-up to CGD and Inter-American Dialogue’s publication Fair Growth. Economic Policies for Latin America’s Poor and Middle-Income Majority (Nancy Birdsall, Augusto de la Torre and Rachel Menezes), the Commitment to Equity project (CEQ) is working to answer these and many related questions. A joint effort by the Inter-American Dialogue and Tulane University, the CEQ is designed to measure the impact of taxes and government spending on inequality and poverty in every country of Latin America. The CEQ project also contributes to CGD’s Latin America Initiative which seeks to create a body of policy advice to help the region develop and secure widely shared prosperity. CEQ studies have now been completed on seven countries—Argentina, Bolivia, Brazil, Mexico, Paraguay, Peru, and Uruguay.
The early conclusions of the CEQ project point to a wide variation among countries in their policy choices, and the impact of those choices on income redistribution and poverty reduction. Some examples are:
- Government size varies greatly in Latin America. Government spending is around 40 percent of GDP in Argentina and Brazil, similar to that of some European nations and the US, while it is only half as much in Mexico and Peru.
- Taxes and transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay, less so in Mexico and relatively little in Bolivia and Peru.
- Personal income tax varies from around five percent of GDP in Uruguay to nearly zero in Bolivia. In all countries in which they exist, direct taxes are progressive, but because direct taxes are a small percentage of GDP almost everywhere their redistributive impact is small.
- Cash transfers have reduced extreme poverty by more than 60 percent in Uruguay and Argentina, but only by seven percent in Peru, which spends too little on cash transfer to achieve much poverty reduction. Bolivia spends five times more than Peru (as a share of GDP) but because funds are not targeted to the poor, the amount of redistribution and poverty reduction has been limited. It is only slightly higher than Peru.
- In Brazil and Bolivia, indirect taxes wipe out most of the positive effect of direct transfers, and poverty is almost the same after as before taxes and cash transfers. ·In contrast, poverty in Mexico is lower after indirect taxes and subsidies because the poor pay little in the form of indirect taxes due to exemptions and informality.
- Public spending on education and health is more equalizing than cash transfers in all the countries.
The largely positive redistributive picture of Argentina, Brazil and Uruguay hides some unpleasant facts.
- For instance, about 16 percent of Brazilian social spending goes to tertiary education, mostly benefitting the five percent of the population with incomes above US$50 per day.
- Uruguay, too, allocates subsidies to upper income students.
- Argentina’s sharp rise of public spending during the 2000s has been increasingly financed by distortionary taxes and unorthodox and unsustainable revenue-raising mechanisms.
Nora Lustig is the Samuel Z. Stone Professor of Latin American Economics at Tulane University and nonresident fellow at the Center for Global Development and the Inter-American Dialogue.Authors: Nora Lustig View Profile
The World Bank and the International Monetary Fund (IMF) are the twin giants in global development and economic and financial stability, shaping the agenda for other international organizations and for governments across the world. What new issues face these institutions in a rapidly globalizing world? How are they responding? In this week’s Wonkcast, recorded in the run-up to the institutions’ Spring Meetings, we consider these questions.
On the day of this recording, World Bank president Jim Kim had just delivered an address at Georgetown University in which he set forth his vision for the World Bank, including setting a 2030 target date for an end to extreme poverty around the world.
I start by asking Nancy for her thoughts about the speech—and why demonstrators who once railed at the World Bank and the IMF during the Spring Meetings, and the Annual Meetings in the fall, have been mostly notable by their absence in recent years.
“The World Bank and the IMF have both changed. They’ve adjusted quite dramatically in the last ten years but particularly in the last couple of years,” Nancy replies.
“Jim Kim, in his speech today at Georgetown, talked about inequality – and he used the word injustice – which is a really different way of thinking about the problems in the global system. Of course, the other thing that’s changed is the rise of the emerging markets, and their more insistent demands for changes at the IMF and the World Bank. We are in a very different world,” she says.
This different world may require that the IMF and the World Bank change even faster than in the past.
I ask Todd about the future of the International Development Association (IDA), the concessional window of the World Bank that lends to the world’s poorest countries. In his Georgetown speech, Kim said that he would seek an aggressive replenishment for IDA, a promise that has been made by each new World Bank president.
Todd says it would be better to begin a discussion about how the role of IDA must change, as many recipient countries enjoy solid economic growth that will soon lift them above the IDA income ceiling.
“The soft loan window has eligibility criteria – usually income – and a lot of countries are bumping up against that threshold,” Todd explains.
“There are now 81 [IDA] eligible countries. We estimate that within the next 10 to 15 years, that number will come down to 31 countries; 25 of those countries will be in sub-Saharan Africa. That is a radical departure from what the world looked like a few years ago and from what it looks like today.”
In the face of this rapidly changing client base, what’s next for IDA? A CGD working group report, Soft Lending without Poor Countries: Recommendations for a New IDA, suggests several alternatives, from shrinking IDA to redefining its mission, for example, to include financing solutions to problems that transcend national boundaries, what economists call global public goods—most notably the threat of runaway climate change.
Nancy welcomes recent outspokenness on the issue from Kim and IMF managing director Christine Lagarde. Both leaders have urged international action, and both institutions have released major reports: Turn Down the Heat: Why a 4 Degree C Warmer World Must be Avoided, from the World Bank, and a March report from the IMF that found global energy subsidies—almost entirely for fossil fuels—are a staggering $1.9 trillion—about 2½ percent of global GDP or 8 percent of government revenues.
While each country waits for the next to take the first step in addressing this global problem, Nancy says the World Bank can lead by creating new grant instruments—perhaps funded in part by IDA—to push progress on this increasingly urgent issue facing the planet.
(On a more ambitious scale, Nancy and I have co-authored a brief, based on her longer policy paper, suggesting that the World Bank consider creating an entirely new arm to help address non-finance aspects of the global response to climate change.)
In our whirlwind tour of World Bank/IMF issues, we turn next to the seemingly arcane topic of IMF quota reform, a change agreed by all other major countries but held up by the inability so far of the Obama administration to get agreement from the US congress.
Nancy explains that IMF member countries pledge a certain amount of their reserves to the IMF, which the Fund then lends to countries in financial distress. The amount of each country’s pledge, or “quota,” is commensurate to the country’s influence within the IMF.
IMF members have agreed to double their capital commitments to the IMF, to give it the resources needed to address global shocks such as the 2007-2008 financial crisis. As part of the deal, the quotas were adjusted so that big emerging markets countries like China, Brazil and India would have larger quotas and, in turn, greater influence and votes in IMF proceedings, in keeping with their increased role in the global economy.
Todd and I discuss briefly why the US alone has yet to approve these changes. Nancy underlines why this matters, a point she explained in a recent blog post.
“It’s embarrassing for the US as a fading leader in international development and it’s a failure in safeguarding international financial stability,” she says.
“What this does is expose the dysfunction of our political system at a time when we are losing our leadership at the global level – which is bad for the US, bad for American interests, and bad for the rest of the world.”
This leads naturally to our next topic: the creation of a BRICS bank, a new multilateral institution led and financed by Brazil, Russia, India, China, and South Africa. Why do these countries want to create a new development bank? Would it compete with or complement existing institutions?
Todd says that frustration the BRICS countries feel about the existing institutions is at least part of the motivation. Nancy agrees, adding that the a smaller-than-expected recapitalization of the World Bank (resulting from US unwillingness to back more ambitious funding) and an unmet desire for a stronger focus on infrastructure may also be part of the explanation.
It’s a fast and wide-ranging conversation that covers a lot of ground. I hope you will listen!
My thanks to Alex Gordon for editing the Wonkcast and Catherine An for providing a draft of this blog post.Authors: Lawrence MacDonald View Profile
In his capacity as Global Distinguished Professor at New York University, Ricky Burdett ran an urban design studio at NYU Wagner School of Planning. The studio, entitled London Going East, focussed on the Royal Docks in East London, one of the fastest changing areas in Europe’s most cosmopolitan city currently undergoing a period of sustained growth. Twelve graduate students proposed alternative development scenarios for London’s largest remaining brownfield site, including higher residential neighbourhoods around a waterside park, reconnecting the Royal Albert Dock with its urban hinterland and creating mixed-use quarter next to the University of East London campus and potential CrossRail station at Custom House.
Last week CGD released a new working paper that I’ve been working on—together with my co-authors Tessa Bold, Mwangi Kimenyi, Germano Mwabu, and Alice Ng’ang’a—since I was a grad student in 2007. “Scaling Up What Works: Experimental Evidence on External Validity in Kenyan Education” describes our attempt to bring the wave of randomized impact evaluations in development economics into the policymaking process in Kenya’s Ministry of Education.
My Kenyan co-authors were eager that the Kenyan Ministry of Education get on board the RCT bandwagon. School performance was (/is ) abysmal, yet many of the groundbreaking studies in the education impact evaluation literature were conducted in the Ministry’s own primary schools in Kenya’s Western province! So we set out to replicate, as best we could, one successful impact evaluation conducted by Esther Duflo, Pascaline Dupas, and Michael Kremer, which showed that putting additional teachers on temporary contracts in public schools significantly raised pupils score in math and English.Can governments learn from such NGO pilots?
To answer that question we added one major tweak to the replication study. Instead of running the program through a partner NGO, we randomly assigned half of the schools in our study to receive a contract teacher from an international NGO, and the other half to receive a contract teacher from the Ministry of Education—just as the Ministry prepared to roll out 18,000 contract teachers nationwide. We kept everything else as identical as possible between the NGO and government treatment arm: same salaries, same hiring rules, etc.
Below are the results. We found strikingly similar effects as in the original Dulfo, Dupas, and Kremer study when we had an NGO implement the contract teacher intervention. Test scores rose by roughly 0.18 standard deviations. But when the Ministry of Education (MOE) implemented a seemingly identical program, there was zero impact.
Figure 1. The impact of contract teachers on pupil test scoresSo what does this all mean?
“Find what works” is the unofficial motto of the movement to do more randomized impact evaluations in both education research and development policy. The US Department of Education runs something called the What Works Clearinghouse, where educators can find research-tested solutions. And in the development industry, DfID and 3ie have been commissioning a range of systematic reviews of the evidence for various development interventions in education and other sectors.
The risk of these systematic reviews is that carefully contextualized research projects get summarized as a menu of apolitical fixes that can be applied to any educational system. In this sense the results agenda comes close to what the author Evgeny Morozov decries as “solutionism”: the idea that all problems have benign solutions, often technological or—in the case of education reform—highly technocratic.
Solutionism has its virtues.
I could not be more in favor of “solutionism”. Problems are bad. We should try to solve them with new technologies.
— Matt Yglesias (@mattyglesias) April 2, 2013
Yglesias could just as easily have said “innovations” instead of technologies—and I think that would better capture the phenomenon in the development industry. This is not just about one laptop per child, it includes contract teachers, community scorecards of school performance, and all kinds of non-technological innovations to cut costs and improve performance. These small interventions can add up to big improvements in learning and welfare.
But as we write in the paper, solutions are slippery, especially when deprived of context.
In most of the experimental evaluation literature in development economics, the treatment construct is defined to include only the school- or clinic-level intervention, abstracting from the institutional context of these interventions. Our findings suggest that the treatment in this case was not a “contract teacher’’, but rather a multi-layered organizational structure including monitoring systems, payroll departments, long-run career incentives and political pressures.
In short, as we try to figure out what works, we need to be extremely careful in defining what is the “what.” Is it a contract teacher, or something bigger and more institutionally embedded? To answer that question, and to get closer to policy-relevant solutions, there’s a case to be made that policy-oriented researchers should be working more closely with the governments they’d like to influence. Gabriel Demombynes, who discussed our paper on the World Bank’s “Development Impact” blog, makes this point very well:
I expect this paper will be a sort of Rorschach test for views on RCTs and service delivery in developing countries. Evaluation skeptics may try to cite this as evidence that RCTs are a waste of time, since it suggests that successful interventions implemented by NGOs, as they often are in experiments, may not be replicated at scale by governments. Others might take the paper to indicate that NGOs should be the preferred vehicle for interventions. I think these readings would be mistaken.... we should do many more rigorous studies working with governments where we vary forms of service delivery to better understand what can work in practice.… the long, difficult slog of working to improve government systems is the right one, because it’s the only way to ultimately make services work for the poor at large scale.
The wave of RCTs in education research and development economics is a huge methodological advance. The next step, if we’re serious about large-scale policy reform, is bringing context, politics and the state back into the equation.Authors: Justin Sandefur View Profile
Last week saw a series of news stories break around the world, in what may have been the largest ever cross-border journalistic collaboration. The stories, coordinated by the International Consortium of Investigative Journalists (ICIJ), are based on a major leak of files from company formation agents operating primarily in the British Virgin Islands and the Cook Islands.
The BVI is a major secrecy jurisdiction, and ranks 11th in the most recent Financial Secrecy Index published by the Tax Justice Network, so it is perhaps unsurprising that so many newsworthy uses have already come to light. As the ICIJ note, their findings show already that “Government officials and their families and associates in Azerbaijan, Russia, Canada, Pakistan, the Philippines, Thailand, Mongolia and other countries have embraced the use of covert companies and bank accounts.” Investigations have been announced in India and the Philippines, there is pressure for the same in Greece and France, along with, respectively, presidential and ex-presidential denials of impropriety around family ownership in Azerbaijan and Colombia.
A separate investigation by Global Witness with clear parallels captured remarkable footage of multiple family members of a senior Malaysian politician not only negotiating corrupt asset sales with a requirement for the main payments to be offshore (‘Singapore? It’s the new Switzerland!’), but also providing advice on how to structure the deal illegally to evade all manner of taxes, local ownership requirements and more. Each element of criminality discussed had in common the use of offshore anonymity. This (16 minute) video shows a series of casual discussions with key players, suggesting just how commonplace such behavior has become.
It’s easy to take for granted that we know who owns a company. How else could we trust the company to enter into a business relationship? How would we reassure ourselves that it wouldn’t go bust before fulfilling a contract or making payment? How could customers know that the company is owned by reputable people – not the sort, for example, who might register in Cyprus and use horsemeat to make beef burgers? How would regulators know that company deals are truly competitive, rather than being manipulated by a monopolist with multiple front companies? How would anybody know if taxes are being paid appropriately, rather than shifted offshore through hidden related-party transactions? Or that the proceeds of crime are not funneled through the company—or used to finance terrorism?
Without public information on company ownership, how can anybody know if company owners are honest or crooked? Solvent or failing? Investing properly or running a Ponzi scheme? In short, how can people know if they are dealing with real beef or merely horse meat dressed up as beef?
In a great many cases, in far too many jurisdictions, this information is hidden from sight. But pressure is building for a change – including at the G8. And this recent rash of investigative reports from journalists and NGOs has shown in painful detail just how badly change is needed. But what change in particular?
A lack of transparency about corporate ownership arises (or is deliberately engineered) in two main ways. One is the creation of structures that are, by definition, opaque. These range from the relatively complex to the eminently simple. Towards the complex end are protected cell companies, where multiples ‘cells’ with their own assets and so on exist within a single company; and as this Jersey-based agent puts it,
‘the key point of note is that a person is not a shareholder in the cell company merely by virtue of being a shareholder in a cell created by that cell company. When considering “ownership”, there is no link between the cell company and each of the cells it creates’ (p.6).
At the simple end are bearer shares, which allow the transfer of ownership (from one bearer to another) in complete secrecy. This effectively allows the creation of financial instruments which are a sheet of paper that can be arranged to have any given value – needless to say, a great hit with drug traffickers, money launderers and all those interested in ways to anonymously transfer significant sums. When a US Senate report found the bank HSBC to have committed multiple breaches of US anti-money-laundering regulations, involving hundreds of millions of dollars of Mexican drug money as well as regimes such as Iran and Syria, the skullduggery had been achieved mostly through the abuse of bearer share accounts opened in the Miami branch. Bearer share companies continue to be legal in many countries, including the UK and (of course) the British Virgin Islands (BVI).
The other, less direct but perhaps more pervasive way of hiding ownership is through faulty process: jurisdictions require that ownership information is collected but only by an intermediary, such as a company formation agent. This prevents the information being centrally held or accessed, or indeed published at all. It is thus unavailable to a wide range of potentially interested parties, be they business partners, customers, regulators, law enforcement agencies, or civil society organizations.
This practice creates additional steps in any attempt at international information acquisition: a request from the authorities in another jurisdiction, if deemed valid, can be followed by a request to the appropriate intermediary, who may then provide the information to be passed back up the chain. Or, indeed, they may not. Or they may first notify their client, who may flee. Or they may provide inaccurate information. And so on. Any testing of the system can only occur in the (inevitably few) cases where information requests are accepted and the chain is followed, and even then the success or otherwise of the request will typically not become public information, so even this limited data on the performance of the system tends to be hidden.
The investigative work of Norwegian newspaper Dagens Næringsliv in Cyprus gives a laughable example of how even a system with a public registry can be run so as to prevent meaningful transparency. Treasures Islands author Nick Shaxson has covered the story in English here, but the paper’s photo sums up the position of a ten year backlog.
If you want to know who owned a Cyprus company before 2000 or so, and you can be patient, you may be in luck…
It is most welcome that the G8, and the UK in particular, has committed to addressing the transparency of company ownership. The G8 may not be a representative global body, but its members are estimated to account for more than half of the global total of cross-border financial services; and in addition, have enormous influence, direct and indirect, on other jurisdictions. If the G8 ‘gets its own house in order’, as the UK has put it, it can confirm the new norm of effective ownership transparency.
Three elements would be involved:
- First, a commitment to collect all the necessary information – meaning, for example, an end to bearer shares and other potentially harmful structures;
- Second, to agree to exchange such information on an automatic basis (as recognised as the international standard for information exchange by the OECD, which had long supported the much less effective ‘on request’ exchange); and
- Third, to publish such information. In different ways the BVI and Cyprus examples confirm the opacity that can follow from private or public intermediaries holding the information until it is needed. The Open Government Partnership embodies the new consensus of a presumption in favour of publication of big data, and the associated benefits – ‘to promote transparency, fight corruption, empower citizens, and harness the power of new technologies to make government more effective and accountable’ – arguments which Prime Minister David Cameron has made clear apply to companies also.
If the G8 take these steps, and encourage others to follow suit promptly – starting with the UK’s own network of Crown Dependencies and Overseas Territories like the British Virgin Islands – then who knows? This time next year we may all be able to spot the difference between horse and beef.
CGD Publication: It’s All About MeE: Using Structured Experiential Learning (“e”) to Crawl the Design Space - Working Paper 322
It’s All About MeE: Using Structured Experiential Learning (“e”) to Crawl the Design Space - Working Paper 3224/8/13
Here we extend the basic idea of rigorous impact evaluation—the use of a valid counterfactual to make judgments about causality—to emphasize that the techniques of impact evaluation can be directly useful to implementing organizations (as opposed to impact evaluation being seen by implementing organizations as only an external threat to their funding).its-all-about-mee.pdf
This post was originally published in The Broker.
Last month, we published a draft paper setting out a potential new measure of inequality: the Palma, which is the ratio of the income share of the top 10% to that of the bottom 40%. We also posted a blog which summarised the paper and noted the interesting mix of reactions that the paper provoked from the early reviewers – like Marmite, people either loved it or hated it. A couple of comments gave us reason to look at the data again, and we present some additional findings here.
First, why the Palma? The reason to isolate this particular ratio ahead of others (eg the top 20% to the bottom 20%) is that the ‘middle’ 50% - those household between the fifth and the ninth decile – have a relatively stable share of national income both across countries and over time. Gabriel Palma made the original discovery of this phenomenon, hence our suggested title. It is important because it means that much of the politics of distribution can be summarised by this ratio, and that relatively little information is lost in this way.
We stop short of arguing that the Palma therefore captures the entire distribution; clearly that would require the stylised fact of a stable middle 50% share to be rigidly observed, which will not always hold. We appreciate the greater clarity on this point that arises from the suggestion of Ricardo Fuentes-Nieva in this debate – namely that we should present the Palma as a measure of income concentration, so as to avoid the (in our view, misplaced) critique that it does not measure inequality in the entire distribution.
Ricardo also highlighted comments made by Branko Milanovic, who provided us with very helpful feedback on an earlier draft: “Suppose that you have (for simplicity) no overall growth, but you have an increase in the bottom share, and an even greater increase in the top share. Palma goes up. The middle class share declines. So inequality increased although the poor are now better off. ”
We make three points in response to this: first, it is an infrequent occurrence; second, when it has occurred it doesn't actually look very bad; and third, a related failing of the Gini provides stark examples of why policymakers should not rely on it.
If we leave aside the ‘no growth’ assumption, then from our 76 countries with data for c.1990 and c.2010, precisely one country meets the criteria of a rising bottom 40% share, rising top 10% share and a falling middle 50% share: Burundi. The graph summarises the following data: the income share of the bottom 40% increased from 20.0% to 20.8%, the top 10% share increased from 26.6% to 28.0%, and the middle 50% share fell from 53.4% to 51.1%. As a result the Palma rose from 1.33 to 1.35 (by 1.4% if you like), and the Gini fell from 33.33 to 33.27 (0.2%).
We see how it would be possible to make an argument that the Gini is closer to capturing the two-decade change in Burundian inequality; but at best this seems uncertain. The Palma probably does capture a genuine, though small, increase in inequality – but again, the actual changes are sufficiently small that the best summary is probably ‘little change’. We don’t see anything here to suggest a serious problem with the Palma.
It’s interesting, however, to look at the other two cases in our sample where the middle 50% share and the Gini both fall, but the Palma rises. One is Moldova, where the middle 50% share fell from 55.6% to 54.0% and the Gini recorded a 4% fall in inequality; but the top and bottom moved in opposite directions and the Palma ratio rose by 60% from 0.81 to 1.30. It is difficult to see how the Gini view can be defended here.
If anything, the other case is more striking. In Mexico, the middle 50% share fell from 61.9% (a real outlier) to 49.5%, and the Gini fell by 5%. Again, however, as the graph shows the top and bottom moved in opposite directions and the Palma rose sharply from 251%, from 0.80 to 2.81.
Looking at the graph, it’s extremely difficult to see how the perception given by the Gini’s 5% fall can be defended as any kind of measure of what happened to inequality.
The remaining criticism of the Palma revolves around its failure to meet a set of axioms that have become broadly accepted for measures of the inequality of the entire distribution. Given that the Palma is not one of these, this is perhaps unsurprising. Nonetheless, we do intend to explore the Palma’s characteristics further – even if the Gini’s ability to meet most of the axioms does not prevent it producing counter-intuitive findings such as those we have highlighted.
Given the over-sensitivity of the Gini to the middle of the distribution, and the (deliberate) insensitivity of the Palma, policymakers could consider a choice between the two: which aspect of the distribution are you more concerned with? Given the relative stability of the middle, and the relative intuitive clarity of the Palma, the arguments for the Gini do not seem strong.
There is, however, no reason for an absolute choice to be made. As emerged unambiguously from the UN consultation, the eventual post-2015 framework – and indeed any domestic policy framework – can and should contain multiple inequality indicators. This means targets and indicators for group inequalities across the whole framework – including gender, disability, age, ethnolinguistic, urban-rural and regional, and the important intersections. The Palma would be an obvious addition, allowing targets and indicators in relation to income group inequalities also.
We would also support a stand-alone goal on inequality, for the norm-setting power as much as anything. Further thought is still needed on whether this should include both gender and economic inequalities, and – more generally – on whether the Gini still has a useful role to play.Authors: Alex Cobham View Profile
This post originally appeared on the Peterson Institute for International Economics blog.
On April 1, the Indian Supreme Court rejected the attempt by Novartis, the Swiss pharmaceutical company, to patent a new version of the leukemia drug Glivec. The latest verdict follows previous rulings that granted compulsory licenses to an Indian generic drug manufacturer for a kidney cancer drug (Nexavar) patented by Bayer. Five important questions are raised by these rulings.
1. What do the recent rulings say about rule of law in India?
The perception, even caricature, of India (among foreigners doing business especially) is one of pathological dysfunction: bureaucrats obstruct, politicians plunder, policemen harass, and judges delay. The quip on rule of law is that India may have rule but China has law. There is some truth in this caricature. That is all the more reason to celebrate the recent ruling, beyond whether or not one agrees with its judgment and the supporting legal arguments.
In the Novartis case as in the Nexavar case, India has provided due process for foreign companies and patent holders comparable to those in advanced democracies. Patent offices have decided on patents and compulsory licensing granted to Indian companies; their verdicts have been challenged before an independent appellate body, whose verdicts have in turn been contested in the courts.
In every instance, the deciding authority has reviewed the arguments and facts, drawn on evidence, relied upon domestic and foreign precedents, and explained its decisions. Even if outcomes have gone against foreign companies, there can be little doubt about procedure. And in a country notorious for interminable delays in administrative and judicial procedures, patent-related cases have been decided in timely fashion.
2. Is India anti-intellectual property (IP) and anti-foreign?
Taken individually, the patent cases do not point to categorical hostility to IP protection or to foreigners. The spirit imbuing all the recent patent cases in India has been to strike a balance between the legitimate returns to inventors and investors against the concerns of consumers in a country where the affordability of drugs is of paramount political and social concern. But that is unavoidable if, for example, the prices charged by a drug company exceed the income of more than 99.999 percent of households in a country and if generic alternatives are available at one-tenth or even one-thirtieth the cost.
But balance and fairness toward foreigners and to the demands of intellectual property rights have not been ignored. For example, the Indian Supreme Court decided to take on the Novartis case instead of waiting for the lower courts out of concern that delays could cut into the life of the patent. Also, when deciding on the compulsory licensing fee that generic drug makers should pay Bayer (the German maker of the cancer drug Nexavar) the Indian patent office opted for the highest end of the range recommended by the World Health Organization (WHO). And in the subsequent review, the appellate body increased this fee further. Hostility to foreign companies would have translated into weaker protections than this.
India is transitioning from a development stage of being a net user of technology (which favored weak IP protection) to one of being both a user and producer of technology (which favors stronger IP protection). The drug industry too has evolved from exclusively comprising generic manufacturers to one with greater representation of research and development-based companies.
In implementing the World Trade Organization’s TRIPs (Trade-Related Intellectual Property Rights) agreement, domestic patent law has been strengthened from virtually no protection for pharmaceuticals to some protection. But recent rulings and the underlying Indian law still tend to favor weaker rather than stronger protection of IP. This reflects the strength of the generic drug industry and of consumer groups advocating affordable health care. The challenge for India will be to ensure that the law does not get out of step with the demands of a country that needs foreign investment and new technologies.
3. Does the Novartis ruling show that India is an outlier?
Critics have suggested that India is a deviant for being the only country where Novartis’ claim has been rejected. Left out is the fact that even in the United States, the Novartis application—which was really for a successor version of Glivec—was in fact first rejected by the patent office, only for a higher authority to overturn the initial ruling. The Indian verdict, like that of the US patent office, may well be more within the range of reasonable interpretations of what constitutes patentability than has been asserted by critics.
To some extent, Novartis was hoist by its own petard. Drug companies in a rush to file patents make very broad claims to maximize the scope of their monopoly. A consequence is that subsequent patents’ claim to novelty get undermined. That said, Indian patent law, especially Section 3 (d), governing such cases, has arguably introduced a new requirement of &”efficacy” that could limit the scope of patent protection for future inventions. The Supreme Court ruling on the interpretation of this term confuses as much as it clarifies.
Whether Indian law and the recent rulings are deviant can only be tested through impartial international adjudication by the WTO (World Trade Organization). As I said in my recent testimony to the US Congress, recourse to the WTO’s dispute settlement process may be necessary and desirable to settle the competing claims of foreign companies and India.
4. What was the Novartis case really about?
Leaving aside all the technical arguments, the Novartis case was sui generis. The drug Glivec was a genuinely new and important discovery deserving of patent protection. But in a bit of bad timing for Novartis, the patent underlying Glivec was filed just before India changed its IP laws. So, technically speaking, India could claim that it had no obligation to protect Glivec.
But if the spirit of the WTO’s TRIPs agreement was that large countries such as India should contribute in part (not fully) to the financing of research and development of major drug discoveries, then the Supreme Court ruling could be seen as unsatisfactory. In retrospect, perhaps both Novartis and the Indian government should have attempted a negotiated settlement that recognized the unique situation relating to the Glivec patent rather than opt for the high profile legal route. The Novartis ruling could illustrate the maxim that special cases make for confusing law.
5. Will there be international consequences from recent rulings?
Other developing countries, such as Brazil, Thailand, and even China, could be emboldened by the Indian example and decide to dilute their own patent protection regimes. Even more consequential could be the impact on advanced economy patent regimes.
The US patent system has come in for intense scrutiny for its patent proliferation (including frivolous patents), its increasing tendency to hinder competition rather than promote innovation, and especially for its capture by patent owners with deep pockets. (These are explained at length in an excellent recent paper in the Journal of Economic Perspectives by Professors Boldrin and Levine of the University of Washington, St. Louis, MO). A body of opinion argues vehemently that in fact the US patent system is broken and needs radical overhaul.
At such a time, the Indian Supreme Court ruling—as a new and independent voice—could add to the momentum for a fundamental reassessment. The ruling is appealing because it asks a question that was both naïve and salient. The judges wanted to know whether the Novartis patent is a ruse to prolong an existing monopoly beyond reasonable limits, a question that has wider resonance.
Is India undervaluing patents or is the rest of the world overvaluing them? That might be one of the more intriguing questions raised by the Supreme Court ruling.
Note: The author would like to thank Jayashree Watal for helpful discussions.Authors: Arvind Subramanian View Profile
In a new interview with ArchDaily, LSE Cities’ Director Ricky Burdett, discusses the challenges facing architects today, and how can we make sure that cities grow sustainably and equitably in an increasingly urbanized world.
You can also watch Professor Burdett discuss the role of the Independent Airports Commission and the challenges facing the UK – click here to see more.
I and all my colleagues at the Center for Global Development (CGD) are thrilled with the announcement today that CGD senior fellow, Michael Clemens, has won this year’s Royal Economic Society prize - a prize awarded annually to the author(s) of the best non-solicited paper published in The Economic Journal (read the journal or ungated version). Michael shares the prize with three former CGD staff: Steven Radelet, now at the Georgetown School of Foreign Service, Rikhil Bhavnani of the University of Wisconsin, and Samuel Bazzi of Boston University. Michael is in the United Kingdom to accept the award on behalf of his co-authors at a ceremony that took place today at the Royal Economic Society annual conference.
Michael and his co-authors asked a much debated question: Does foreign aid contribute to economic growth in relatively poor countries? In “Counting Chickens When They Hatch: Timing and the Effects of Aid on Growth”, the authors reassessed that question using the same data and the same regression analyses of the three most influential prior aid-growth studies – for the first time distinguishing between types and timing of different kinds of aid. Their work suggests that increases in aid have indeed, been followed on average by increases in investment and growth, with the magnitude of the relationship being modest, varying greatly across recipients, and diminishing at high levels of aid.
An award of this kind vindicates the emphasis at CGD on supporting rigorous research that meets the highest academic standards – as an investment in the people and ideas that will have impact far beyond any particular news cycle.
I am delighted that the paper --the result of world-class research-- has been honored in this way. I also want to thank two supporters of the research: the William and Flora Hewlett Foundation and the John D. and Catherine T. MacArthur Foundation.