nep-dev New Economics Papers
on Development
Issue of 2006‒08‒19
29 papers chosen by
Jeong-Joon Lee
Towson University

  1. Contract Enforcement, Institutional Stability, and the Level and Maturity of International Debt By Wasseem Mina; Jorge Martinez-Vazquez
  2. Convergence behaviour in exogenous growth models By Jochonia S Mathunjwa; Jonathan Temple
  3. Chinese Unions: Nugatory or Transforming? An Alice Analysis By Jianwei Li; David Metcalf
  4. Agricultural Returns and Conflict: Quasi-Experimental Evidence from a Policy Intervention Programme in Rwanda By Florence Kondylis
  5. A Gold Rush Theory of Economic Development By Ralph Ossa
  6. Technology, Informationand the Decentralization of the Firm By Daron Acemoglu; Philippe Aghion; Claire Lelarge; John Van Reenen; Fabrizio Zilibotti
  7. The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India By Philippe Aghion; Robin Burgess; Stephen Redding; Fabrizio Zilibotti
  8. The Marginal Product of Capital By Francesco Caselli; James Feyrer
  9. Individual Attitudes towards Immigrants: Welfare-State Determinants across Countries By Giovanni Facchini; Anna Maria Mayda
  10. Geography Rules Too! Economic Development and the Geography of Institutions By Maarten Bosker; Harry Garretsen
  11. Innovation and export portfolios By Klinger, Bailey; Lederman, Daniel
  12. Openness and technological innovations in developing countries : evidence from firm-level surveys By Almeida, Rita; Fernandes, Ana Margarida
  13. International benchmarking of infrastructure performance in the Southern African Customs Union Countries By Bogetic, Zeljko; Fedderke, Johannes W.
  14. Firm Productivity in Bangladesh Manufacturing Industries By Fernandes, Ana M.
  15. Does aid help improve economic institutions ? By Coviello, Decio; Islam, Roumeen
  16. Measuring financial performance in infrastructure : an application to Europe and Central Asia By Ebinger, Jane O.
  17. Investing cash transfers to raise long term living standards By Gertler, Paul; Martinez, Sebastian; Rubio-Codina, Marta
  18. Infrastructure and growth in South Africa : direct and indirect productivity impacts of 19 infrastructure measures By Fedderke, Johannes W.; Bogetic; Zeljko
  19. A Primer on Foreign Aid By Steve Radelet
  20. Social Cohesion, Institutions, and Growth By William Easterly; Jozef Ritzan; Michael Woolcock
  21. Are the planned increases in aid too much of a good thing? By Owen Barder
  22. Stormy Days on an Open Field: Asymmetries in the Global Economy By Nancy Birdsall
  23. The Role of the IMF in Well-Performing Low-Income Countries By Steve Radelet
  24. Back to the Future for African Infrastructure? Why State-Ownership Is No More Promising the Second Time Around By John Nellis
  25. After the Big Push? Fiscal and Institutional Implications of Large Aid Increases By Todd Moss; Arvind Subramanian
  26. An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa By Todd Moss; Gunilla Pettersson; Nicolas van de Walle
  27. A Stability and Social Investment Facility for High Debt Countries By Nancy Birdsall
  28. Governance and Corruption in Public Health Care Systems By Maureen Lewis
  29. A New Database of Health Professional Emigration from Africa By Michael A. Clemens; Gunilla Pettersson

  1. By: Wasseem Mina (U.A.E. University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies)
    Abstract: Contract enforcement and institutional stability play an important role in determining the level and maturity of international debt. Contract enforcement is modeled as a fixed cost that investors incur to obtain the contracted, gross returns on international investments. Institutional stability is modeled as the probability that the same contract enforcement cost will persist over time. Countries with poor contract enforcement and institutionally unstable impose higher contract enforcement costs and increase uncertainty about their structure. The level and maturity of international debt is reduced as a result. The empirical estimation provides support for the hypothesis. Stronger contract enforcement and institutional stability increase international lending and lengthen its maturity.
    Keywords: Contract enforcement; Institutions; Stability; International Lending; Maturity
    Date: 2006–05–01
  2. By: Jochonia S Mathunjwa; Jonathan Temple
    Abstract: This paper analyzes several aspects of convergence behaviour in the Solow growth model. In empirical work, a popular approach is to log-linearize around the steady-state. We investigate the conditions under which this approximation performs well, and discuss convergence behaviour when an economy is some distance from the steady-state. A formal analysis shows that convergence speeds will be heterogeneous across countries and over time. In particular, the Solow model implies that convergence to a growth path from above is slower than convergence from below. We find some support for this prediction in the data.
    Keywords: convergence, economic growth, Solow model
    JEL: O41
    Date: 2006–08
  3. By: Jianwei Li; David Metcalf
    Abstract: China has, apparently, more trade union members than the rest of the world put together. But the unions do not function in the same way as western trade unions. In particular Chinese unions are subservient to the Partystate.The theme of the paper is the gap between rhetoric and reality. Issues analysed include union structure, membership, representation, new laws (e.g. promoting collective contracts), new tripartite institutions and theinteraction between unions and the Party-state. We suggest that Chinese unions inhabit an Alice in Wonderland dream world. In reality although Chinese unions do have many members (though probably not as many as the official 137 million figure) they are virtually impotent when it comes to representing workers. Because theParty-state recognises that such frailty may lead to instability it has passed new laws promoting collective contracts and established new tripartite institutions to mediate and arbitrate disputes. While such laws are welcome they are largely hollow: collective contracts are very different from collective bargaining and the incidence of cases dealt with by the tripartite institutions is tiny. Much supporting evidence is presented drawing on detailed case studies undertaken in Hainan Province (the first and largest special economic zone) in 2004 and 2005. The need for more effective representation is appreciated by some All China Federation of TradeUnions (ACFTU) officials. But reasonable reforms do seem a long way off, so unions in China will continue to echo the White Queen:"The rule is, jam tomorrow and jam yesterday - but never jam today" and, alas, tomorrow never comes.
    Keywords: China, trade unions, Hainan Province, collective contracts, collective disputes, membership
    JEL: J5
    Date: 2005–12
  4. By: Florence Kondylis
    Abstract: In 1994, the genocide in Rwanda caused massive waves of displacement. We use thesemigrations as a quasi-natural experiment to measure the cost of civil conflict. In 1997, thegovernment implemented a resettlement and land redistribution policy to improve theconditions for returnees and to induce conflict resolution. We assess the asset effect of theprogramme on agricultural output, and use this intervention as an instrument to measure skillspill-over mechanisms across returnees and stayers. Time differentials in the implementationof the policy across villages are used to identify its impact. Evidence that the policy wassuccessful in raising migrants' agricultural production by increasing access to land is found,as well as higher returns to on-farm labour among the returnees in all areas. However,evidence of lower returns to agricultural inputs for returnees in policy areas suggests that thepolicy induced a `ghetto effect'. The policy implications of this study are that, in order topromote durable peace, and therefore sustainable development in the region, these sources ofeconomic inequalities across groups need to be addressed.
    Keywords: Microeconomic cost of conflict, migrations, land redistribution, instrumentalvariable quantile regressions
    JEL: C4 O12 Q12 Q15 R15 R23
    Date: 2005–12
  5. By: Ralph Ossa
    Abstract: This paper presents a model of social learning about the suitability of local conditions fornew business ventures and explores its implications for the microeconomic patterns ofeconomic development. I show that: i) firms tend to 'rush' into business ventures with whichother firms have had surprising success thus causing development to be 'lumpy'; ii) sufficientbusiness confidence is crucial for fostering economic growth; iii) development may involvewave-like patterns of growth where successive business ventures are first pursued and thengiven up; iv) there is, nevertheless, no guarantee that firms pursue the best venture even in thelong-run.
    Keywords: Economic Development, Social Learning, Lumpiness
    JEL: O10 O12 O14
    Date: 2006–03
  6. By: Daron Acemoglu; Philippe Aghion; Claire Lelarge; John Van Reenen; Fabrizio Zilibotti
    Abstract: This paper develops a framework to analyze the relationship between the diffusion of newtechnologies and the decentralization decisions of firms. Centralized control relies on theinformation of the principal, which we equate with publicly available information.Decentralized control, on the other hand, delegates authority to a manager with superiorinformation. However, the manager can use her informational advantage to make choices thatare not in the best interest of the principal. As the available public information about thespecific technology increases, the trade-off shifts in favour of centralization. We show thatfirms closer to the technological frontier, firms in more heterogeneous environments andyounger firms are more likely to choose decentralization. Using three datasets of French andBritish firms in the 1990s, we report robust correlations consistent with these predictions.
    Keywords: Decentralization, heterogeneity, learning, the theory of the firm
    JEL: O31 O32 O33 F23
    Date: 2006–05
  7. By: Philippe Aghion; Robin Burgess; Stephen Redding; Fabrizio Zilibotti
    Abstract: This paper investigates whether the effects, on registered manufacturing out- put,employment, entry and investment, of dismantling the .license raja system of central controlsregulating entry and production activity in this sector .vary across Indian states with differentlabor market regulations. The effects are found to be unequal depending on the institutionalenvironment in which industries are embedded. In particular, following de-licensing,industries located in states with pro-employer labor market institutions grew more quicklythan those in pro-worker environments. Our results emphasize how local institutions matterfor whether industry in a region benefits or is harmed by the nationwide delicensing reform.
    Keywords: delicensing, economic development, labour regulation
    JEL: O14 O18 O21
    Date: 2006–06
  8. By: Francesco Caselli; James Feyrer
    Abstract: Whether or not the marginal product of capital (MPK) differs across countries is a questionthat keeps coming up in discussions of comparative economic development and patterns ofcapital flows. We use easily accessible macroeconomic data to shed light on this issue, andfind that MPKs are remarkably similar across countries. Hence, there is no prima faciesupport for the view that international credit frictions play a major role in preventing capitalflows from rich to poor countries. Lower capital ratios in these countries are insteadattributable to lower endowments of complementary factors and lower efficiency, as well asto lower prices of output goods relative to capital. We also show that properly accounting forthe share of income accruing to reproducible capital is critical to reach these conclusions.One implication of our findings is that increased aid flows to developing countries will notsignificantly increase these countries' incomes.
    Keywords: investment, capital flows
    JEL: E22 O11 O16 O41
    Date: 2006–08
  9. By: Giovanni Facchini; Anna Maria Mayda
    Abstract: This paper analyzes welfare-state determinants of individual attitudes towards immigrants - within and across countries - and their interaction with labor-market drivers of preferences. We consider two different mechanisms through which a redistributive welfare system might adjust as a result of immigration. Under the first scenario, immigration has a larger impact on individuals at the top of the income distribution, while under the second one it is low-income individuals who are most affected through this channel. Individual attitudes are consistent with the first welfare-state scenario and with labor-market determinants of immigration attitudes. In countries where natives are on average more skilled than immigrants, individual income is negatively correlated with pro-immigration preferences, while individual skill is positively correlated with them. These relationships have the opposite signs in economies characterized by skilled migration (relative to the native population). Such results are confirmed when we exploit international differences in the characteristics of destination countries' welfare state.
    Keywords: immigration attitudes, welfare state, political economy
    JEL: F10 F22 J61
    Date: 2006
  10. By: Maarten Bosker; Harry Garretsen
    Abstract: To explain cross-country income differences, research has recently focused on the so-called deep determinants of economic development, notably institutions and geography. This paper sheds a different light on these determinants. We use spatial econometrics to analyse the importance of the geography of institutions. We show that it is not only absolute geography, in terms of for instance climate, but also relative geography, the spatial linkages between countries, that matters for a country’s gdp per capita. Apart from a country’s own institutions, institutions in neighboring countries turn out to be relevant as well. This finding is robust to various alternative specifications.
    JEL: F43 O11
    Date: 2006
  11. By: Klinger, Bailey; Lederman, Daniel
    Abstract: This paper examines the link between sectoral concentration and overall performance in the search for on-the-frontier innovations, inside-the-frontier innovations, and export booms. It extends the literature by increasing country coverage and the types of search processes considered, and by focusing on the links with overall performance in these search processes. After controlling for the necessary relationships as well as fixed effects at the country/commodity group level, the paper finds a clear negative relationship between the concentration of innovation portfolios and performance: countries that are the most successful in these search processes have their successes spread across a broader range of industries than those with poorer performance. Furthermore, the search for export booms exhibits the least amount of sectoral concentration and path-dependence. These findings suggest that public support for these processes need not be focused in a narrow range of sectors, and modeling of these processes in theoretical work, particularly in the search for export booms, should be of a stochastic flavor.
    Keywords: Education for Development,Economic Theory & Research,Innovation,Pro-Poor Growth and Inequality,Technology Industry
    Date: 2006–08–01
  12. By: Almeida, Rita; Fernandes, Ana Margarida
    Abstract: The authors analyze the role of international technological diffusion for firm-level technological innovations in several developing countries. Their findings show that, after controlling for firm, industry, and country characteristics, exporting and importing activities are important channels for the diffusion of technology. They also find evidence that the majority of foreign-owned firms are significantly less likely to engage in technological innovations than minority foreign-owned firms or domestic-owned firms. The authors interpret this finding as evidence that the technology transferred from multinational parents to majority-owned subsidiaries is more mature than that transferred to minority-owned subsidiaries. This finding supports the idea that equity joint ventures maximize technology transfers to local firms.
    Keywords: Technology Industry,ICT Policy and Strategies,Education for Development,Innovation,Foreign Direct Investment
    Date: 2006–08–01
  13. By: Bogetic, Zeljko; Fedderke, Johannes W.
    Abstract: The paper provides a first, systematic benchmarking of infrastructure performance in the Southern African Customs Union (SACU) countries (South Africa, Botswana, Lesotho, Namibia, and Swaziland) in four major sectors-electricity, water and sanitation, information and communication technology, and transportation-against the relevant group of comparator countries using a new World Bank international data base with objective and perception-based indicators of infrastructure performance from over 200 countries. The analysis suggests important comparative gaps in all major infrastructure sectors, although performance varies widely across the SACU region. Performance shortfalls are particularly acute in rural areas where most of the poor live. The benchmarking is envisaged as a comparative input into deeper analyses of infrastructure performance, especially in the context of the ongoing scaling-up efforts (for example, South Africa, Lesotho, and Botswana).
    Keywords: Transport Economics Policy & Planning,Infrastructure Regulation,Energy Production and Transportation,Infrastructure Economics,Economic Theory & Research
    Date: 2006–08–01
  14. By: Fernandes, Ana M.
    Abstract: The author studies the determinants of total factor productivity (TFP) for manufacturing firms in Bangladesh using data from a recent survey. She obtains TFP measures by making use of firm-specific deflators for output and inputs. Controlling for industry, location, and year fixed effects, she finds that: (1) firm size and TFP are negatively correlated; (2) firm age and TFP exhibit an inverse-U shaped relationship; (3) TFP improves with the quality of the firm ' s human capital; (4) global integration improves TFP; (5) firms with research and development activities and quality certifications have higher TFP, while more advanced technologies improve TFP only in the presence of significant absorptive capacity; (6) power supply problems cost firms heavily in terms of TFP losses; and (7) the presence of crime dampens TFP.
    Keywords: Water and Industry,Economic Growth,Microfinance,Small Scale Enterprise,Economic Theory & Research
    Date: 2006–08–01
  15. By: Coviello, Decio; Islam, Roumeen
    Abstract: Aid is expected to promote better living standards by raising investment and growth. But aid may also affect institutions directly. In theory, these effects may or may not work in the same direction as those on investment. The authors examine the effect of aid on economic institutions and find that aid has neither a positive nor a negative impact on existing measures of economic institutions. They find the results using pooled data for non-overlapping five-year periods, confirmed by pooled annual regressions for a large panel of countries and by pure cross-section regressions. The authors explicitly allow for time invariant effects that are country specific and find the results to be robust to model specifications, estimation methods, and different data sets.
    Keywords: Development Economics & Aid Effectiveness,Public Institution Analysis & Assessment,Economic Theory & Research,Economic Policy, Institutions and Governance,School Health
    Date: 2006–08–01
  16. By: Ebinger, Jane O.
    Abstract: Unintentional implicit subsidies (hidden costs) to public utilities can be considered an illegitimate claim on public resources. This paper examines the role and sources of hidden costs in the energy and water sectors in the Europe and Central Asia (ECA) region. It reviews available data and introduces a model-the Hidden Costs Calculator-that can be used to quantify the burden on governments of infrastructure policy and implementation decisions. This simple-to-apply model provides insight into three key components of hidden costs that affect infrastructure-poor bill collection rates, excessive losses due to inefficient operations or theft from the networks, and tariffs set below cost-recovery rates. The major advantage of this model is that, using existing data, it can provide a single measure for hidden costs that can be easily calculated, tracked, and reported. Therefore it can monitor and benchmark trends across sectors and countries without extensive or costly data collection. The model compares the difference between actual revenues and revenues that could be anticipated in a well-functioning system operating with cost-covering tariffs, bills paid, and losses normative for networks of a certain age and design. The underlying premise is that quantifying the order of magnitude of each component of hidden costs has potential for strengthening infrastructure policy dialogue and influencing decisionmakers who allocate scarce budgetary resources.
    Keywords: Town Water Supply and Sanitation,Energy Production and Transportation,Water Use,Economic Theory & Research,Infrastructure Regulation
    Date: 2006–08–01
  17. By: Gertler, Paul; Martinez, Sebastian; Rubio-Codina, Marta
    Abstract: The authors test whether poor households use cash transfers to invest in income generating activities that they otherwise would not have been able to do. Using data from a controlled randomized experiment, they find that transfers from the Oportunidades program to households in rural Mexico resulted in increased investment in micro-enterprise and agricultural activities. For each peso transferred, beneficiary households used 88 cents to purchase consumption goods and services, and invested the rest. The investments improved the household ' s ability to generate income with an estimated rate of return of 17.55 percent, suggesting that these households were both liquidity and credit constrained. By investing transfers to raise income, beneficiary households were able to increase their consumption by 34 percent after five and a half years in the program. The results suggest that cash transfers to the poor may raise long-term living standards, which are maintained after program benefits end.
    Keywords: Economic Theory & Research,Small Area Estimation Poverty Mapping,Municipal Housing and Land,Land and Real Estate Development,Real Estate Development
    Date: 2006–08–01
  18. By: Fedderke, Johannes W.; Bogetic; Zeljko
    Abstract: Empirical explorations of the growth and productivity impacts of infrastructure have been characterized by ambiguous (countervailing signs) results with little robustness. A number of explanations of the contradictory findings have been proposed. These range from the crowd-out of private by public sector investment, non-linearities generating the possibility of infrastructure overprovision, simultaneity between infrastructure provision and growth, and the possibility of multiple (hence indirect) channels of influence between infrastructure and productivity improvements. The authors explore these possibilities using panel data for South Africa over the 1970-2000 period, and a range of 19 infrastructure measures. Using a number of alternative measures of productivity, the prevalence of ambiguous (countervailing signs) results, with little systematic pattern is also shown to hold for their data set in estimations that include the infrastructure measures in simple growth frameworks. The authors demonstrate that controlling for potential endogeneity of infrastructure in estimation robustly eliminates virtually all evidence of ambiguous impacts of infrastructure, due for example to possible overinvestment in infrastructure. Controlling for the possibility of endogeneity in the infrastructure measures renders the impact of infrastructure capital not only positive, but of economically meaningful magnitudes. These findings are invariant between the direct impact of infrastructure on labor productivity, and the indirect impact of infrastructure on total factor productivity.
    Keywords: Transport Economics Policy & Planning,Economic Theory & Research,Public Sector Economics & Finance,Economic Growth,Inequality
    Date: 2006–08–01
  19. By: Steve Radelet
    Abstract: Controversies about aid effectiveness go back decades. Some experts charge that aid has enlarged government bureaucracies, perpetuated bad governments, enriched the elite in poor countries, or just been wasted. Others argue that although aid has sometimes failed, it has supported poverty reduction and growth in some countries and prevented worse performance in others. This new working paper by CGD senior fellow Steve Radelet explores trends in aid, the motivations for aid, its impacts, and debates about reforming aid. It begins by examining aid magnitudes and who gives and receives aid. It discusses the multiple motivations and objectives of aid, some of which conflict with each other. It then explores the empirical evidence on the relationship between aid and growth, which is divided between research that finds no relationship and research that finds a positive relationship (at least under certain circumstances). It also examines some of the key challenges in making aid more effective, including the principal-agent problem and the related issue of conditionality, and concludes by examining some of the main proposals for improving aid effectiveness.
    Keywords: Foreign aid, poverty reduction
    JEL: O19 O00 F00
    Date: 2006–07
  20. By: William Easterly; Jozef Ritzan; Michael Woolcock
    Abstract: We present evidence that measures of “social cohesion,” such as income inequality and ethnic fractionalization, endogenously determine institutional quality, which in turn casually determines growth.
    Keywords: Political institutions, social cohesion, poverty, economic policy
    JEL: H5 O1
    Date: 2006–08
  21. By: Owen Barder
    Abstract: Donor countries have committed themselves to increase aid to developing countries by 60 percent over the next five years; and larger increases would be needed to meet the Millennium Development Goals (MDGs). But there are concerns that there may be a limit on the amount of aid that developing countries can absorb and use effectively—and that large aid flows might even be harmful. Could a large increase in aid be “too much of a good thing?” This essay disentangles the seven possible reasons why additional aid might not be effective. These include microeconomic effects (e.g., transactions costs), macroeconomic effects (e.g., ‘Dutch Disease’) and the impact on political economy (e.g., the ‘Resource Curse’). The paper looks at each possible constraint in turn. The paper finds that there are indeed serious obstacles to effective use of increased aid, but that none is immutable. All of the constraints which limit the effective use of additional aid can be addressed by a relatively small set of practical improvements in the way that aid is provided and used. Donors have already committed themselves to a significant program of aid reform. If the measures to which donors are committed were consistently implemented, the seven constraints to effective aid absorption could be relaxed. The paper concludes that, provided increased aid is accompanied by reforms to the way aid is delivered, the capacity of developing countries to absorb and use aid should not be presented as a barrier to the increases in aid which would be needed to meet the MDGs.
    Keywords: Foreign aid, dutch disease, absorption, millenium development goals, transaction costs, resource curse, aid reform
    JEL: E01 D23 O0
    Date: 2006–07
  22. By: Nancy Birdsall
    Abstract: Openness is not necessarily good for the poor. Reducing trade protection has not brought growth to today’s poorest countries, and open capital markets have not been good for the poorest households in emerging market economies. In this paper I present evidence on these two points. First, countries highly dependent on primary exports two decades ago, despite their substantial engagement in trade and a marked decline in their tariff rates in the 1990s, have failed to grow. Second, within high-debt emerging market economies the financial crises of the last decade, whether induced by domestic policy problems or global contagion, have been especially costly for the poor (in welfare terms if not in terms of absolute income losses). I discuss the asymmetries in the global economy that help explain why countries and people cannot always compete on equal terms on the “level playing field” of the global economy.
    Keywords: IMF, trade protection, economic growth, market economy, tariff
    JEL: F13 F40
    Date: 2006–02
  23. By: Steve Radelet
    Abstract: The IMF began to play a prominent role in low-income countries in the late 1970s and 1980s when many countries faced overvalued exchange rates, growing budget deficits, high inflation, and low reserves. But times have changed, and many low-income countries no longer face these problems and do not need classic IMF programs. This paper explores options for the role of the IMF in well-performing low-income countries that no longer require IMF financing. It argues that in these countries the IMF should use more non-funded programs, and it should play a much less dominant role in overall conditionality. These countries should be able to focus more on achieving high-priority development goals that are outside the expertise of the IMF, such as in health, water, education, private sector development, and agriculture. While playing a less prominent role, the Fund should continue to be engaged in helping countries to maintain an appropriate macroeconomic framework. For some countries, a non-funded program like the new Policy Support Instrument (PSI) would be appropriate, while others could shift further to a program of surveillance and monitoring. In well-performing countries the Fund should provide public ratings on macroeconomic policy, ideally fully incorporated into the World Bank’s CPIA rating system.
    Keywords: IMF, exchange rate, budget deficit, inflation, reserves, conditionality
    JEL: F0 F4 O0 E0 E4 E43
    Date: 2006–02
  24. By: John Nellis
    Abstract: Too many African state-owned enterprises (SOEs), particularly those in infrastructure sectors, have a long history of poor performance. African governments and donors labored through the 1970s and 1980s to improve SOE performance through “commercialization”——i.e., methods short of ownership change. These generally failed, giving rise, in the 1990s, to much more heavy reliance on private sector participation and ownership. This approach produced some successes, but Africa’s private participation in infrastructure (PPI) initiatives have been comparatively few and weak. A number of those that have been launched have run into problems, to the point where both investor and African government interest in the approach has waned in the last few years. The reform is not popular—surveys of public opinion in 15 African countries reveal that only a third of respondents prefer private to state-owned firms. Nonetheless, African states (and their supporters) should not jettison the PPI approach. Rather, they should acknowledge its limitations, and recognize the large scope and moderate pace of the preparatory measures required both to improve their investment climates and to make PPI work effectively.
    Keywords: privatization, private sector, African state-owned enterprise, commercialization, private participation in infrastructure
    JEL: F0 F4 O0
    Date: 2006–02
  25. By: Todd Moss; Arvind Subramanian
    Abstract: There are indications that overseas development assistance budgets will continue to increase in coming years, spurred in part by growing calls for a ‘Big Push’ in aid to the poorest countries. In this paper, we estimate the effect of six proposals on aid intensity ratios for 52 low-income countries. We find that, in the average scenario, at least 35 of these countries would see aid inflows equivalent to more than half of total public expenditure and 17 would cross the 75 percent threshold. We also consider possible negative influences of such increases on the incentives for institutional development, on the accountability of state institutions to their own populations, and on long-term sustainability.
    Keywords: overseas development assistance, big push
    JEL: O1 F35
    Date: 2005–10
  26. By: Todd Moss; Gunilla Pettersson; Nicolas van de Walle
    Abstract: A number of proposals today support a substantial increase in foreign aid levels to sub-Saharan Africa even though this region already receives a historically unprecedented volume of aid. This essay reviews the evidence regarding the potentially negative effects of aid dependence on state institutions, a topic which has received relatively little attention. We note several pathways through which political institutions might be adversely affected and devote particular attention to fiscal and state revenue issues. In addition to reviewing the economic literature on the aid-revenue relationship, this essay brings in the long-standing political science literature on state-building to consider the potential impact of aid dependence on the relationship between state and citizen. We conclude that states which can raise a substantial proportion of their revenues from the international community are less accountable to their citizens and under less pressure to maintain popular legitimacy. They are therefore less likely to have the incentives to cultivate and invest in effective public institutions. As a result, substantial increases in aid inflows over a sustained period could have a harmful effect on institutional development in sub-Saharan Africa.
    Keywords: foreign aid, sub-Saharan Africa, aid dependence, state building, public institutions
    JEL: O1
    Date: 2006–01
  27. By: Nancy Birdsall
    Abstract: A number of high-debt emerging-market economies face structural, long-term debt problems that tend to keep their growth rates low, that impart an unequalizing bias to the growth process, that severely constrain social spending and human development, and that make them vulnerable to capital flow reversals. Unless the nature and pace of growth can be improved in these lower-middle income countries, the Millennium Development Goals (MDGs) are unlikely to be met either in many of these countries, or globally. These high-debt emerging-market economies face an impossible choice between draconian and never-ending fiscal austerity, or crisis and a “debt event.” Both “bitter pills" impose high social and economic costs. This paper proposes the creation of a “Stability and Social Investment Facility” (SSF) to be housed either at the IMF or the World Bank. It would be a long-term facility to help high-debt emerging market countries cope with and ultimately overcome what will otherwise remain a chronic structural weakness. The SSF would be an instrument providing a steady and predictable source of long-term funds as well as a strong policy signal to help high-debt emerging-market economies reduce their debt burden without having to forgo vital pro-poor social expenditures and growth programs. For the facility to have a significant impact on debt and income dynamics in the eligible countries, we estimate it would need to lend $10-20 billion a year. The financial cost to the donor community would be the interest subsidy built into the SSF; were the subsidy 200 basis points, the cost in the first year would be $20 million for every $1 billion of lending. The rationale for the subsidy element is its catalytic role in facilitating a strong commitment to both prudent macroeconomic policies and pro-poor growth policies. The lower interest cost of the SSF, even if modest, would make it financially and politically easier for governments in eligible countries to address their long-term social (MDG) objectives, while maintaining a sound fiscal stance.
    Keywords: emerging market, high-debt, structural debt
    JEL: F0 O0
    Date: 2006–01
  28. By: Maureen Lewis
    Abstract: What factors affect health care delivery in the developing world? Anecdotal evidence of lives cut tragically short and the loss of productivity due to avoidable diseases is an area of salient concern in global health and international development. This working paper looks at factual evidence to describe the main challenges facing health care delivery in developing countries, including absenteeism, corruption, informal payments, and mismanagement. The author concludes that good governance is important in ensuring effective health care delivery, and that returns to investments in health are low where governance issues are not addressed.
    Keywords: governance, corruption, health care, disease, absenteeism
    JEL: H0 O0 I1
    Date: 2006–01
  29. By: Michael A. Clemens; Gunilla Pettersson
    Abstract: The migration of doctors and nurses from Africa to rich countries has raised fears of an African medical brain drain. But empirical research on the issue has been hampered by lack of data. How many doctors and nurses have left Africa? Which countries did they leave? Where have they settled? As part of a larger study of the consequences of the international migration of African health professionals, we compiled a database of the cumulative bilateral net flows of African-born physicians and nurses to the nine most important destination countries. It is the first database of net bilateral migration flows specific to a skilled profession collected systematically for a large number of developing countries. In this note we make these data available to the research community.
    Keywords: migration, brain drain, Africa, health professionals
    JEL: I1 O0
    Date: 2006–08

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