Arrested development

Kevin Lewis

September 02, 2012

Development (Paradigm) Failures

Roland Hodler & Axel Dreher
Journal of Development Economics, forthcoming

Over time, the international development community has advocated various development paradigms, but countries following these paradigms have often performed poorly. We provide an explanation for this poor performance. In our model, the political leader of a developing country chooses a policy and whether to implement it in an honest or corrupt manner. These choices affect domestic production and aid inflows. Production is high when productive capacity is high, and when the policy is appropriate in the country-specific circumstances and implemented honestly. Aid inflows are high when the policy is close to the paradigm. In equilibrium, countries with low productive capacity and high corruption resulting from weak political institutions follow the paradigm more closely. Hence, our model suggests that development paradigms have a tendency to fail because they are primarily followed by countries that would fail anyway. We provide empirical evidence in support of the main assumptions and results.


Explaining Urban Social Disorder and Violence: An Empirical Study of Event Data from Asian and Sub-Saharan African Cities

Henrik Urdal & Kristian Hoelscher
International Interactions, Summer 2012, Pages 512-528

By 2050, two thirds of the world's population will live in cities, and the greatest growth in urban populations will take place in the least developed countries. This presents many governments with considerable challenges related to urban governance and the provision of services and opportunities to a burgeoning urban population. In the current article, we use a new event dataset on city-level urban social disorder, drawing upon prominent theories in the conflict literature. The dataset spans the 1960-2009 period, covering 55 major cities in Asia and Sub-Saharan Africa and includes data on nonviolent actions such as demonstrations and strikes and violent political actions like riots, terrorism, and armed conflict. We find that urban social disorder is associated in particular with low economic growth rates and hybrid democratic regimes, while level of development, economic inequality, large youth bulges, and economic globalization do not seem to affect levels of urban social disorder.


The cost of providing electricity to Africa

Orvika Rosnes & Haakon Vennemo
Energy Economics, September 2012, Pages 1318-1328

Sub-Saharan Africa lacks electricity. We estimate the cost of providing electricity to the region. To do so, we build an optimisation model that links the electricity demand to the supply and links the supply to the generation, distribution and transmission of electricity between countries. To the best of our knowledge, such a model is novel in the literature. We determine that the investment cost of providing electricity to Sub-Saharan Africa over a ten-year period is between 160 and 215 billion U.S. dollars, depending on assumptions for electricity access and the cross-country electricity trade. Although the electricity trade increases the investment cost estimate moderately, it provides a high return to African countries and is cost-efficient overall.


Documenting the birth of a financial economy

Tavneet Suri, William Jack & Thomas Stoker
Proceedings of the National Academy of Sciences, 26 June 2012, Pages 10257-10262

The birth and explosive growth of mobile money in Kenya has provided economists with an opportunity to study the evolution and impact of a new financial system. Mobile money is an innovation that allows individuals to store, send, and receive money on their mobile phone via text message. This system has opened up basic financial services to many who were previously excluded, and has had real and measurable impacts on the ability of households to protect themselves against health risks. Using a unique survey instrument covering nearly 2,300 households over 2008-2010, we first document the lightning-fast adoption of mobile money in Kenya, which was faster than most documented modern technologies in the United States. We then present evidence on how this innovation allows households to respond better to unexpected adverse health events. We find that in the face of these events, users of mobile money are better able to tap into remittances to finance additional health care costs without having to forego necessary expenditures on education, food, and other consumption needs.


Should Aid Reward Performance? Evidence from a Field Experiment on Health and Education in Indonesia

Benjamin Olken, Junko Onishi & Susan Wong
NBER Working Paper, March 2012

This paper reports an experiment in over 3,000 Indonesian villages designed to test the role of performance incentives in improving the efficacy of aid programs. Villages in a randomly-chosen one-third of subdistricts received a block grant to improve 12 maternal and child health and education indicators, with the size of the subsequent year's block grant depending on performance relative to other villages in the subdistrict. Villages in remaining subdistricts were randomly assigned to either an otherwise identical block grant program with no financial link to performance, or to a pure control group. We find that the incentivized villages performed better on health than the non-incentivized villages, particularly in less developed areas, but found no impact of incentives on education. We find no evidence of negative spillovers from the incentives to untargeted outcomes, and no evidence that villagers manipulated scores. The relative performance design was crucial in ensuring that incentives did not result in a net transfer of funds toward richer areas. Incentives led to what appear to be more efficient spending of block grants, and led to an increase in labor from health providers, who are partially paid fee-for-service, but not teachers. On net, between 50-75% of the total impact of the block grant program on health indicators can be attributed to the performance incentives.


Exploring the Paradoxical Consequences of State Collapse: The cases of Somalia 1991-2006 and Lebanon 1975-82

Ersun Kurtulus
Third World Quarterly, July 2012, Pages 1285-1303

Relative social and economic well-being in the aftermath of a state's collapse is usually explained on the basis of a single case, Somalia, and with reference to the impact of endogenous factors such as the repressive and predatory nature of the state which collapsed and the ability of civil society actors and institutions to fulfill those functions that are normally performed by a state. This article challenges this theoretical view. As can be seen from a study of Lebanon, relative well-being after state collapse is more common than it appears to be at first glance. Moreover, given the limited role that the Lebanese state played in the economic and political spheres before the breakdown of state authority in 1975, the repressive and predatory nature of the collapsed state cannot be the explanatory variable in this case. Exogenous factors, such as remittances from abroad, international loans bestowed upon residual state institutions and ‘political money' from foreign powers, are the decisive factors generating such paradoxical developments. Study of Somalia and Lebanon also shows the limitations of the conceptualisations of state collapse prevalent in the literature.


Does Urbanization Affect Rural Poverty? Evidence from Indian Districts

Massimiliano Calì & Carlo Menon
World Bank Economic Review, forthcoming

Although a high rate of urbanization and a high incidence of rural poverty are two distinct features of many developing countries, there is little knowledge of the effects of the former on the latter. Using a large sample of Indian districts from the 1983-1999 period, we find that urbanization has a substantial and systematic poverty-reducing effect in the surrounding rural areas. The results obtained through an instrumental variable estimation suggest that this effect is causal in nature and is largely attributable to the positive spillovers of urbanization on the rural economy rather than to the movement of the rural poor to urban areas. This rural poverty-reducing effect of urbanization is primarily explained by increased demand for local agricultural products and, to a lesser extent, by urban-rural remittances, the rural land/population ratio, and rural nonfarm employment.


Were Equatorial Regions Less Affected by the 2009 Influenza Pandemic? The Brazilian Experience

Cynthia Schuck-Paim et al.
PLoS ONE, August 2012

Although it is in the Tropics where nearly half of the world population lives and infectious disease burden is highest, little is known about the impact of influenza pandemics in this area. We investigated the mortality impact of the 2009 influenza pandemic relative to mortality rates from various outcomes in pre-pandemic years throughout a wide range of latitudes encompassing the entire tropical, and part of the subtropical, zone of the Southern Hemisphere (+5°N to -35°S) by focusing on a country with relatively uniform health care, disease surveillance, immunization and mitigation policies: Brazil. To this end, we analyzed laboratory-confirmed deaths and vital statistics mortality beyond pre-pandemic levels for each Brazilian state. Pneumonia, influenza and respiratory mortality were significantly higher during the pandemic, affecting predominantly adults aged 25 to 65 years. Overall, there were 2,273 and 2,787 additional P&I- and respiratory deaths during the pandemic, corresponding to a 5.2% and 2.7% increase, respectively, over average pre-pandemic annual mortality. However, there was a marked spatial structure in mortality that was independent of socio-demographic indicators and inversely related with income: mortality was progressively lower towards equatorial regions, where low or no difference from pre-pandemic mortality levels was identified. Additionally, the onset of pandemic-associated mortality was progressively delayed in equatorial states. Unexpectedly, there was no additional mortality from circulatory causes. Comparing disease burden reliably across regions is critical in those areas marked by competing health priorities and limited resources. Our results suggest, however, that tropical regions of the Southern Hemisphere may have been disproportionally less affected by the pandemic, and that climate may have played a key role in this regard. These findings have a direct bearing on global estimates of pandemic burden and the assessment of the role of immunological, socioeconomic and environmental drivers of the transmissibility and severity of this pandemic.


Can corruption foster regulatory compliance?

Fabio Méndez
Public Choice, forthcoming

The legal and economic literatures overwhelmingly support the notion that regulatory compliance is always less in the presence of corruption. This paper departs from those literatures and shows that, whenever public officials are paid fixed wages, an increase in corruption may actually foster compliance. The conditions that make this possible are laid down in a theoretical model. Empirical evidence that corroborates the theoretical findings is provided using firm-level data for 26 transition economies.


Corruption, food subsidies, and opacity: Evidence from the Philippines

Aashish Mehta & Shikha Jha
Economics Letters, forthcoming

We argue that subsidized food distribution systems that fail to publicize how much food has been allocated to each local market will experience high rates of theft on the margin as they are expanded. We provide the first comparable cross-section of estimates of subsidized food theft. As predicted, in regions of the Philippines that were allocated more subsidized rice to distribute, a larger percentage of the rice went missing.


Letter Grading Government Efficiency

Alberto Chong et al.
NBER Working Paper, August 2012

We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the US and how long it takes. About 60% of the letters were returned, taking over 6 months, on average. The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants. The evidence suggests that both technology and management quality influence the quality of government.


Government size, democracy, and corruption: An empirical investigation

Go Kotera, Keisuke Okada & Sovannroeun Samreth
Economic Modelling, November 2012, Pages 2340-2348

Previous studies on the effect of government size on corruption have produced mixed results. In an attempt to explain these ambiguous results, this study investigates the effect of government size on corruption by taking into account the role of the democracy in each country. Using annual data of 82 countries between 1995 and 2008, the estimation results indicate that an increase in government size can lead to a decrease in corruption if the democracy level is sufficiently high and, in contrast, can lead to an increase in corruption if it is too low. As robustness checks, the estimations using a different index of corruption and a different proxy for government size are also conducted. The results reveal that our main findings are robust. Furthermore, to address endogeneity problems, we conduct the instrumental variables estimation and the system generalized method of moments estimation, the results of which also support our primary findings. These results provide some important implications for policymakers seeking to perform government interventions without aggravating corruption.


The Merit of Meritocratization: Politics, Bureaucracy, and the Institutional Deterrents of Corruption

Carl Dahlström, Victor Lapuente & Jan Teorell
Political Research Quarterly, September 2012, Pages 656-668

Comparative studies of corruption focus on the selection and incentives of policymakers. With few exceptions, actors who are in charge of implementing policies have been neglected. This article analyzes an original data set on the bureaucratic features and its effects on corruption in fifty-two countries. Two empirical findings challenge the conventional wisdom in literature. First, certain bureaucratic factors, particularly meritocratic recruitment, reduce corruption, even when controlling for a large set of alternative explanations. Second, the analysis shows that other allegedly relevant bureaucratic factors, such as public employees' competitive salaries, career stability, or internal promotion, do not have a significant impact.


Corruption, growth and ethnic fractionalization: A theoretical model

Roy Cerqueti, Raffaella Coppier & Gustavo Piga
Journal of Economics, June 2012, Pages 153-181

This paper analyzes the existing relationship between ethnic fractionalization, corruption and the growth rate of a country. We provide a simple theoretical model. We show that a nonlinear relationship between fractionalization and corruption exists: corruption is high in homogeneous or very fragmented countries, but low where fractionalization is intermediate. In fact, when ethnic diversity is intermediate, constituencies act as a check and balance device to limit ethnically-based corruption. Consequently, the relationship between fractionalization and growth rate is also non-linear: growth is high in the middle range of ethnic diversity, low in homogeneous or very fragmented countries.


Does the Leader's Ethnicity Matter? Ethnic Favoritism, Education, and Health in Sub-Saharan Africa

Raphaël Franck & Ilia Rainer
American Political Science Review
, May 2012, Pages 294-325

In this article we reassess the role of ethnic favoritism in sub-Saharan Africa. Using data from 18 African countries, we study how the primary education and infant mortality of ethnic groups were affected by changes in the ethnicity of the countries' leaders during the last 50 years. Our results indicate that the effects of ethnic favoritism are large and widespread, thus providing support for ethnicity-based explanations of Africa's underdevelopment. We also conduct a cross-country analysis of ethnic favoritism in Africa. We find that ethnic favoritism is less prevalent in countries with one dominant religion. In addition, our evidence suggests that stronger fiscal capacity may have enabled African leaders to provide more ethnic favors in education but not in infant mortality. Finally, political factors, linguistic differences, and patterns of ethnic segregation are found to be poor predictors of ethnic favoritism.


Combining Top-Down and Bottom-Up Accountability: Evidence from a Bribery Experiment

Danila Serra
Journal of Law, Economics, and Organization, August 2012, Pages 569-587

Monitoring corruption typically relies on top-down interventions acting on the probability of external controls or the severity of punishment. An alternative approach to fighting corruption is to rely on bottom-up monitoring. This article investigates the effectiveness of an accountability system that combines bottom-up monitoring and top-down auditing using data from a specifically designed bribery lab experiment. I compare "public officials"' tendency to ask for bribes under: (1) no monitoring, (2) conventional top-down auditing, and (3) an accountability system that gives citizens the possibility of reporting corrupt officials, knowing that reports lead to top-down auditing with some low probability (the same as in (2)). The experimental results suggest that "combined" accountability systems can be highly effective in curbing corruption, even when citizens' "voice" leads to formal top-down punishment with a relatively low probability.


The Odds of Achieving the MDGs

Delfin Go & José Alejandro Quijada
World Bank Research Observer, August 2012, Pages 143-184

Three questions are frequently raised about the attainment of the Millennium Development Goals (MDGs). Where do developing countries stand? What factors affect their rate of progress? Can lagging countries achieve these goals in the few years remaining until 2015? This paper examines these questions and takes a closer look at the variation in the rate of progress among developing countries. We argue that answers from the available data are surprisingly positive. In particular, three-quarters of developing countries are on target or close to being on target for all of the MDGs. Among the countries that are falling short, the average gap for the top half is about 10 percent. For those that are on target, or close to it, solid economic growth, policies, and institutions have been the key factors in their success. With improved policies and stronger growth, many countries that are close to being on target could achieve these targets by 2015 or soon after.


Demographic structure and the security of property rights: The role of development and democracy

Philipp Harms & Philipp an de Meulen
European Journal of Political Economy, forthcoming

It is often argued that countries with a high population share of children and young workers should attract large capital inflows from aging industrialized economies. However, many of these countries deter foreign investors by a high risk of creeping oroutright expropriation. In this paper we explore whether the correlation between countries' demographic structure and the perceived security of property rights reflects a causal relationship. We show that, in low-income countries, the ratio of young to old workers has a positive effect on the perceived security of property rights if the political system is sufficiently democratic. By contrast, this relationship cannot be observed in middle income countries.


Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth

Michael Clemens et al.
Economic Journal, June 2012, Pages 590-617

Recent research yields widely divergent estimates of the cross-country relationship between foreign aid receipts and economic growth. We re-analyse data from the three most influential published aid-growth studies, strictly conserving their regression specifications, with sensible assumptions about the timing of aid effects and without questionable instruments. All three research designs show that increases in aid have been followed on average by increases in investment and growth. The most plausible explanation is that aid causes some degree of growth in recipient countries, although the magnitude of this relationship is modest, varies greatly across recipients and diminishes at high levels of aid.


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