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Policy Area Papers on Development policy

How to Reconcile Democracy, the State and the Global Market
Giovanni Farese & Paolo Savona, World Economics, June 2017
Nation states were the vehicle for market capitalism, but global market capitalism has freed itself from regulations imposed by nation states. A trilemma between democracy, the state and the market became an irreconcilable one, and gathered momentum. The post-War period has shown it is impossible to have a fixed exchange rate, free capital movement and sovereign monetary policy all working at the same time. To reconcile the trilemma, development banks need to cooperate or merge to finance transcontinental infrastructure projects to push up growth and employment and the World Trade Organization (WTO) should include a norm whereby countries joining it adopt the same exchange-rate regime (be it fixed or flexible). Without a deep reform in the global architecture, disequilibria, both economic and social, will continue to worsen, and conflicts will arise – only another ‘great depression’ will shock the international economy to induce the necessary international cooperation and joint action.
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Sovereign Wealth Fund Investment in Economic Transformation: Toward an Institutional Framework
Patrick Schena & Asim Ali, World Economics, March 2017
The prospect of prolonged lower hydrocarbon and commodity prices has forced many countries to reconsider both fiscal policy and sovereign wealth fund asset allocation to address possible liquidity needs. In order to analyze the diversity and effectiveness of public investment vehicles it is necessary to recognize that a sovereign wealth fund is a genre of state investment. As a type of state investor sovereign wealth funds sit within an institutional continuum that includes many other bodies, such as national development banks. Well-functioning operating and governance models have evolved among large-scale private equity investors and components of these are suited to government application.
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The Indian Economy: From Growth to Stagflation to Liberal Reform
Deepak Lal , World Economics, March 2016
This paper considers the optimistic scenario that India was on a high growth path and would follow China’s path with a lag (as its reforms started in 1991 compared with China’s in 1980) which would produce an economic miracle. This did not happen and since 2011 India’s growth seemed to be reverting to what has been termed “the Hindu Rate of growth”. This paper considers why this happened and the likely future path of the Indian economy following the victory of Narendra Modi’s Bhartiya Janta Party (BJP). The paper evaluates the change in India’s economic fortunes following the 1991 economic reforms in historical perspective. The sources of the growth acceleration are explained with an examination of why growth faltered. India’s highly disputed revision of the GDP series shows annual growth rising to 7.5% in 2015-16, but it is more likely that it is around 6%. The author concludes that given its economic fundamentals, with improved policies India would be able to grow at about 10% leading to a per capita income growth of about 8.5–9% for the next two decades.
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A New Challenge: The myriad new opportunities offered by East Africa’s oil and gas basin
Ziwase Ndhlovu, World Economics, June 2011
Over the last five years there has been a noticeable shift in focus among leading oil and gas companies active in the continent of Africa. Rather than focusing on West and North Africa for investment opportunities, there has been a move to explore new prospects in East Africa. The region is rapidly becoming a prominent investment destination in both the upstream and downstream oil sectors. In 2011 several majors including BG, Eni and Petrobras, are planning to sink wells and all of them are investing significant amounts in search of deepwater gas reserves. Alongside these exploration initiatives the author assesses plans for a new pipeline with a capacity of 450,000 barrels a day, to be constructed from Juba in Southern Sudan to Lamu on the Kenyan coast. Increasingly, as the author notes, the region is emerging as a significant location for investment in hydrocarbon resources.
The European Union’s Trade Policies and Africa’s Exports
Olayinka Idowu Kareem, World Economics, June 2011
An important determinant of the sustainability of growth in Africa is the extent to which the continent can exploit the opportunities available from trade. Trade barriers exist to key African exports, which make it difficult for the continent to take advantage of the growth-enhancing benefits of trade or to follow an export-orientated development plan, leaving Africa dependent on the world price of natural resources and minerals such as oil, copper and diamonds. This study evaluates the impact of trade policies in the European Union (EU) and other large trading blocs on a range of African exports. We found that, contrary to many pronouncements, trade policies in the EU, especially tariff barriers, have not significantly hindered Africa’s exports. Furthermore, it was discovered that the export performance of African exports is hampered more by non-tariff barriers to African exports and by capacity constraints within African countries.
Connecting the African Continent: Infrastructure, growth and poverty reduction
Peter Dearden, Nemat Shafik & Leonard Tedd, World Economics, June 2011
This paper provides an overview of the contribution of economic infrastructure to growth and human development in Africa. Challenges for infrastructure provision including finance, recurrent costs and public-sector responsibilities are covered, together with assessment of the global trends of urbanisation, climate change and future resource scarcity. The paper describes and explains the work of the UK Department for International Development on economic infrastructure in Africa, covering innovations in areas of private-sector infrastructure, regional approaches, improving the investment climate, and international coordination. The paper concludes with several policy directions for current political processes.
Trade Out of Poverty
Peter Lilley, Clare Short, Sir Menzies Campbell & Michael Hastings, World Economics, June 2011
Integration into the world economy has proven a powerful means for countries to promote economic growth, development, and poverty reduction, and therefore governments need to have a renewed focus on trade policy towards developing countries to help improve the lives of the world’s poorest. The world’s richest countries should open their markets unconditionally to all Least Developed and low-income countries. The EU and US and other developed countries’ Rules of Origin requirements should be aligned so that developing countries have only one set of rules to adhere to, as the existing complex rules frequently result in countries paying tariffs or being excluded by bureaucracy. Rich countries must end their export and domestic subsidies that undermine the livelihoods of millions. Tariffs between the poorest countries be reduced and customs duties replaced with other sources of revenue. There needs to be a significant increase in emphasis on infrastructure, roads, ports and administrative structures that make trade possible.
Boosting Infrastructure Investments in Africa
Donald Kaberuka, World Economics, June 2011
The absolute and relative lack of infrastructure in Africa suggests that the continent’s competitiveness could be boosted by scaling up investments in infrastructure. Such investments would facilitate domestic and international trade, enhance Africa’s integration into the global economy and promote better human development outcomes, especially, by bringing unconnected rural communities into the mainstream economy. While there are yawning gaps in all infrastructure subsectors, inadequate energy supply is directly correlated to low education levels, poor health outcomes, as well as limited economic opportunities and technology choices. Efforts by government to invest in infrastructure have proved inadequate to close the infrastructure gap. These investment opportunities have not been seized by the private sector due to the unfavourable business environment, poor incentives and regulatory frameworks. Therefore, Africa’s infrastructure challenge is not only in closing the huge financing gap, but also in building the necessary skills and capacity to attract investments. Although scaling up infrastructure investments offers the private sector enormous opportunities, unlocking these investments should be preceded by appropriate policy and structural reforms. The good news is that there is hope, and current developments are signalling an increased awareness by African governments. Development partners should therefore take advantage of the increasing political will for reform through knowledge and capacity building activities, especially, in fragile and post-conflict countries where the need is greatest.
The G20 After the Seoul Summit: G-force or G-string?
Graham Bird, World Economics, March 2011
To some, the G20 offers a representative, legitimate and effective forum for dealing with global economic issues, and represents a distinct improvement on the G8. To others it is seen as still lacking full legitimacy and as being an unlikely institutional vehicle for organising global economic cooperation and coordination. This article assesses these views in the aftermath of the Seoul summit of November 2010. To what extent has the momentum that appeared to have been generated at the London summit in April, 009 been maintained? Many of the more intractable problems facing the world economy were, in fact, deferred in 2009, allowing the impression to be created that there was a higher degree of international consensus than there really was. Moreover, the crisis circumstances at the time placed a high premium on swift policy action. As the crisis has eased, more fundamental disagreements have emerged, and these were reflected by the discussions in Seoul. The reality is likely to be that while it is a useful institution for debate and discussion, and perhaps for helping to resolve disagreement, the achievements of the G20 will probably turn out to be more modest than the London summit might have suggested.
Low-Carbon Development for the Least Developed Countries
Alex Bowen & Sam Fankhauser, World Economics, March 2011
The global community has to act collectively to halt climate change. But such collective action must take into account the development needs of the least developed countries (LDCs), which are likely to be hit earliest and hardest by climate change. The priority of such countries remains poverty alleviation and the achievement of the Millennium Development Goals, but the three challenges of limiting climate change, adapting to its consequences and reducing poverty have to be faced together. This requires LDCs eventually to follow a development path that differs from those trodden by today’s industrial countries and emerging market economies. There is no room in the long term for high-emission economies, and high-carbon growth is unsustainable given the possible consequences for fossil-fuel supplies and climate-change impacts.
On Economic Growth and Domestic Saving in India
Tarlok Singh, World Economics, March 2011
This study examines the economic growth and domestic saving in India. The onset of gradual economic reforms since the 1980s provided some fillip to growth, and the momentum was carried forward through the adoption of a wide-ranging structural adjustment program since the beginning 1990s. The sustainability of an accelerated growth trajectory hinges heavily on the acceleration of saving and investment and the improvements in productivity. While foreign direct investment, liberalization of trade and the globalisation of goods and financial markets have well-documented gains, the accrual of these gains is contingent on the acceleration of productivity to a threshold level where the firms can effectively compete for market share in both domestic and international markets. Gobalization is unlikely to take developing economies out of low level equilibrium traps of underdevelopment, if it is not accompanied by the institutional reforms, development of adequate infrastructure, unleashing of productivities, development of efficient financial sector, and the improvements in the competitiveness of import-competing industries in the domestic and export-oriented industries in the international markets.
Trade and Growth in the Post-Crisis World
Ronald U. Mendoza, World Economics, December 2010
Countries that have most successfully used trade as part of a high growth strategy tend to exhibit a distinct trading pattern that maximises learning. The evidence points to three main strategies: first, trading itself matters, as firms learn from a larger market; second, with whom you trade matters, as richer and more technologically advanced trading partners offer more scope for learning; and, third, what products you trade matters, as more sophisticated tradables are linked to more intensive learning and greater discovery of new economic opportunities. The recent global crisis may create forces that could accentuate the need for learning, as well as opportunities for it. Trade-induced learning of a more South–South flavour is likely to prove critical for future success.
A Rising Consumer Class: A perspective on India
Manish Sonthalia, World Economics, December 2010
India has had two stages of growth, both related to consumption since 1947. The first was based on developing economic self sufficiency; the second on rising disposable income. It is now entering its third period of consumption growth which sees it entering the world stage as one of the largest consumers in the world. This paper explains the factors that are driving this dramatic shift from the emerging middle classes to the patterns of consumption and investment in India today.
Savings for the Poor: Banking on mobile phones
Ignacio Mas, World Economics, December 2010
This paper reviews the relevance of formal financial services – in particular, savings – to poor people, the economic factors that have hindered the mass-scale delivery of such services in developing countries, and the technology-based opportunities that exist today to make massive gains in financial inclusion. It also highlights the benefits to government from universal financial access, as well as the key policy enablers that would need to be put in place to allow the necessary innovation and investments to take place.
Keith Boyfield on Paul Collier: The Plundered Planet

World Economics, September 2010
There is no summary available for this paper.
Özlem Öz on World Development Report 2009: Reshaping Economic Geography

World Economics, September 2010
There is no summary available for this paper.
Economic Growth in Venezuela: Policies vs oil wealth
Claudio Paiva, World Economics, September 2010
This paper presents an empirical analysis of Venezuela’s economic growth in the last several decades, providing possible explanations for the country’s weak performance relative to its peers. First, a growth accounting exercise uncovers a long, negative trend in total factor productivity from the late 1970s through the early 2000s. This trend was also accompanied by a declining ratio of capital stock per worker, attributable to an earlier period of misguided policies that favoured excessive accumulation of physical capital to the detriment of human capital and economic efficiency. Second, empirical tests suggest that Venezuela’s economic growth has been highly and increasingly dependent on oil revenues. Finally, econometric estimates indicate that lax fiscal policies and macroeconomic instability have had a negative impact on growth.
Regionalising Infrastructure Reform in Developing Countries
Ioannis N. Kessides, Roger G. Noll & Nancy C. Benjamin, World Economics, September 2010
The principal conclusion of this essay is that regionalisation of infrastructure regulation (i.e. the creation of supranational regulatory authorities such as WATRA or ECTEL) is likely to yield significant benefits that go beyond exploiting economies of scale in both infrastructure industries and regulatory institutions. Regional integration of regulation, combined with regionalisation of regulated firms, assists developing countries in overcoming national limits in technical expertise, enhances national capacity to make credible commitments to stable regulatory policy, facilitates the introduction of competition into historically monopolised markets, improves the efficiency of infrastructure industries by allowing them to grow without respecting economically artificial national boundaries, and ultimately increases infrastructure investment.
Keith Boyfield on Dambisa Moyo: Dead Aid
Keith Boyfield
World Economics, June 2010
There is no summary available for this paper.
Vietnam: From Transitional State to Asian Tiger?: Issues of the Vietnamese economic transformation experience
F. Gerard Adams & Anh Le Tran, World Economics, June 2010
Putting aside the legacy of its unique history, Vietnam has achieved an excellent growth record. But it is still far behind the leading East Asian economies. We consider the Vietnamese growth strategy in light of the controversies about ‘accumulation vs assimilation’ and ‘non-intervention vs governing the market’. We discuss the changes that are occurring as a result of the actions of the still large state-owned sector, and as a result of growing private domestic and FDI-led entrepreneurship. Policy options for directing economic development are today influenced by Vietnam’s participation in AFTA and WTO. Trade links with China, Japan and the US also influence the direction of Vietnamese development.
Finance, Technology and Multinationals from the Periphery: An analysis of the Latin American experience
Edmund Amann & Werner Baer, World Economics, March 2010
This article analyses the emergence of Latin American multinational corporations (MNCs), with a particular emphasis on the roles of finance and technology. It is established that the need to acquire foreign technology and finance has played a key role in the emergence of Latin MNCs. However, in respect to technology at least, the internationalisation process is also increasingly predicated upon the exploitation of domestically generated assets.
Export-led Growth via Export Platform Strategies: The impact of free trade agreements on the structure of FDI
Akinori Tomohara & Kazuhiko Yokota, World Economics, December 2009
Free trade agreements (FTAs) have the potential to impact FDI structures. Specifically, we explore when and how export platform strategies can result in export-led growth. A reduction in trade costs, including tariffs and non-tariff barriers, are likely to lead to export platform FDI. Cost advantages in a host country, as well as quality labour and scale economies, are also effective in attracting export platform FDI. We conclude that medium–high technology industries in low-income countries are likely to benefit from export platform FDI. A few indices are suggested to evaluate the conditions under which countries and industries can benefit from export platform FDI.
The World’s Poorest Nations and the Global Financial Crisis
Nicholas Imparato & Shalendra D. Sharma, World Economics, December 2009
Unlike many earlier financial crises, the current sub-prime-induced crisis originated in advanced economies (in the US housing sector) in the summer of 2007, and rapidly mushroomed into a global financial crisis by September 2008. Developing nations, especially the ‘least developed countries’ (LDCs), have been hit particularly hard with a sharp drop in export demand and in net capital inflows. The current turmoil threatens to undo the impressive gains in economic growth and convergence many developing nations have achieved over the past decade – a reversal of fortune that includes casting millions back into poverty. What explains the vulnerability of the LDCs, and how have the G8, the G20, the IMF and the World Bank responded to help mitigate the economic and social costs of the crisis? How can developing nations, especially the poorest, better insulate their economies from the vagaries of the global financial markets? This paper addresses these issues.
Are MENA Countries Reaping the Benefits of Inflows?: A comparative analysis of migrants’ remittances and FDI flows
Magda Kandil & Ida Aghdas Mirzaie, World Economics, September 2009
Using data for a sample of developing countries, we analyse the effects of external flows, namely migrants’ remittances and FDI flows, on real output growth, price inflation and components of aggregate demand. The historical evidence indicates unstable patterns of FDI inflows to a sample of nine MENA countries. In contrast, remittances flows appear to be more stable over time in recipient countries. Except for Jordan, real GDP growth does not vary significantly with FDI inflows. Tunisia provides the only significant evidence of an increase in price inflation in response to FDI, which is coupled with a significant increase in private investment. FDI flows stimulate a significant increase in imports in Egypt. Remittances inflows appear, in general, a more important determinant of macroeconomic performance. Remittances inflows stimulate real output growth in Jordan, and decrease price inflation in Egypt and Tunisia. The increase in growth in Jordan is coupled with an increase in private consumption, private investment, real exports and imports with respect to remittances inflows. Moreover remittances increase export growth in Tunisia.
Well-being and Public Attitudes in Afghanistan: Some insights from the economics of happiness
Carol Graham & Soumya Chattopadhyay, World Economics, September 2009
Afghanistan is a context where individuals have to cope with the most adverse of circumstances. Our study of happiness finds that Afghans conform to a remarkably consistent worldwide pattern in the determinants of happiness across individuals within countries of all different development levels. Average happiness scores in Afghanistan, meanwhile, are higher than the world average and on a par with those from Latin America. In contrast, scores on a ‘best possible life’ question are much lower. This suggests that Afghans may be naturally cheerful and/or have adapted their expectations downward in the face of adversity, yet are more realistic when thinking about their situation in relative terms. Also suggestive of adaptation is that Afghans in general do not report to be unhappy when victims of crime and corruption, most likely because these phenomena have become the norm. In contrast, respondents in some Taliban-influenced regions, where crime and corruption are less common, do report unhappiness with corruption victimisation. More generally, resilient preferences for political freedom coexist with tolerance of crime and corruption and low levels of trust in public institutions.
Reforming IMF Conditionality: From ‘streamlining’ to ‘major overhaul’
Graham Bird, World Economics, September 2009
As it has for many years, International Monetary Fund conditionality is currently receiving much attention in the context of the global financial crisis. At the beginning of the 2000s the Fund introduced a policy of ‘streamlining’ intended to reduce the amount of conditionality and refocus it, with a view to increasing country ownership and improving programme implementation. This article uses the results of a report by the IMF’s Independent Evaluation Office into structural conditionality to assess the extent to which the initiative delivered on its promises. More significant seem to be the recent changes associated with the global crisis. The article discusses the evolution of conditionality, and assesses the current situation and the prospects for the future.
The New Economic Powers (NEPs): Leadership opportunities post-crisis
Danny Leipziger & William O’Boyle, World Economics, September 2009
In the wake of the global financial and economic crises, much attention has been focused on large developing economies, particularly the BRICs, and their role in the new economic landscape. Focusing on trends in demographics and output, the emergence of the BRICs crystallised the notion that there was a group of up-and-coming economies towards which global attention was shifting. Over time, however, the term has transcended purely economic considerations – it is an acknowledgement that large emerging economies will play a more important role on the world political stage as well. While the BRICs are major protagonists, they are not completely representative of this global shift – the field of potential global players is undoubtedly larger. This paper examines a group of ten countries that will play an important role in global economics and politics, focusing on the current state of their engagement in the international system, and their representation in the global financial architecture. A critical look at the roles and responsibilities of new actors is particularly important in the current environment as the crisis presents emerging powers with an unprecedented opportunity to increase their level of engagement in both economic and political spheres, as well as to play leadership roles in systemically important initiatives.
Governance and Development: The current role of theory, policy and practice
Michael Chibba, World Economics, June 2009
Governance matters are arguably at the core of international development. What role do theory, policy and practice play in shaping matters of governance with respect to development? This review paper, which is organised in three parts, focuses on this subject since the demise of communism in 1991. In the first part, the theories on the governance and development nexus are outlined. In the second, governance policy is discussed with reference to: the early strategic policy shift; the concepts, principles and framework for enhanced governance; selected reviews by scholars and practitioners; and numerous key current issues. Governance in practice is examined in the third part with the same or similar questions, reviews and current issues. In addition, lessons are drawn from a case study. The conclusion of this paper is threefold: first, it is a fallacy that there is a pre-eminent system of governance that is universally applicable; second, the relevant theories on the subject have a remarkably limited role to play in sculpting policy and practice; and, third, perhaps the single most important problem in policies and practices on governance for development is the failure to temper interventions to the contextual dynamics found in each developing country setting.
An Expanded Concept of Capital in Development Economics
Luc Noiset, World Economics, December 2008
There is no summary available for this paper.
The Wealth and Poverty of Nations: François Bourguignon on fifty years of economic development and the elusive quest for sustained growth
An interview with introduction by Brian Snowdon
World Economics, September 2008
François Bourguignon was Chief Economist and Senior Vice President, Development Economics, at the World Bank before taking up his current position as Director of the Paris School of Economics. He is one of the world’s leading economists in the field of economic growth and development, in particular the relationship between growth, poverty and income distribution. To set the interview in context, Brian Snowdon first provides a brief discussion of several contemporary issues in economic development, including the recently published Commission on Growth and Development Report. In the interview that follows, discussion ranges over several subjects and key issues including Latin America; the fall and rise of development economics; changing conventional wisdom on the role of government; World Bank development research; measuring development; poverty, inequality and development; the Millennium Development Goals; convergence and divergence clubs; growth and inequality; democracy and development; geography v. institutions; globalisation; migration and development; foreign aid and development; improving the business and investment climate; the ‘Stern Report’ and climate change; culture, religion and development; and the IMF, World Bank and WTO.
Growth Strategies and Dynamics: Insights from country experiences
Mohamed A. El-Erian & A. Michael Spence, World Economics, March 2008
The paper examines the challenges that developing countries face in accelerating and sustaining growth. The cases of China and India are examined to illustrate a more general phenomenon which might be called model uncertainty. As a developing economy grows, its market and regulatory institutions change and their capabilities increase. As a result, growth strategies and policies and the role of government shift. Further, as the models of economies in these transitional states are incomplete and because models used to predict policy impacts in advanced economies may not provide accurate predictions in the developing economy case, growth strategies and policies need to be responsive and to evolve as the economy matures. This has led governments in countries that have sustained high growth to be somewhat pragmatic, to treat the policy directions that emerge from the advanced economy model with circumspection, to be somewhat experimental in seeking to accelerate export diversification, to be sensitive to risks and as a result to proceed gradually in areas such as the timing and sequencing of opening up on the current and capital account. The last is an area in which existing theory provides relatively little specific guidance, but in which there are relatively high risks that decline over time as the market matures.
Leonardo Martinez-Diaz on Carol Lancaster, Foreign Aid: Diplomacy, Development, Domestic Politics

World Economics, December 2007
There is no summary available for this paper.
The Role of the IMF in Low-Income Countries: Recent issues
Domenico Lombardi, World Economics, December 2007
The question of whether the IMF should effectively engage with its low-income member countries has recently generated a wide debate among development economists, policymakers, and advocates from nongovernmental organizations. This note elaborates on the important role that the IMF can play in its lowincome member countries, points to some current problems with the Fund's engagement with these countries, and suggests avenues for future improvement.
The Future of North Korea is South Korea: (Or hope springs eternal)
Marcus Noland, World Economics, September 2007
North Korea's famine was in significant part a product of state failure, and unleashed an unintended grassroots process of marketization. Reforms undertaken in 2002 are more usefully interpreted as a response to this development than as a pro-active attempt to improve efficiency, and the government’s stance remains ambivalent. The economy is progressively more integrated with those of China and South Korea, but the modalities differ: involvement with China increasingly occurs on market-conforming terms, while interaction with South Korea has a growing official transfer or subsidy element. Recent floods will contribute to a political context for enhanced South Korean government support.
How to Tackle Poverty: Economists are closing in on the answers
Diane Coyle, World Economics, September 2007
There has been an unprecedented political focus on economic development and poverty reductions since the Gleneagles Summit of 2005, yet it seems economists have been unable to agree on how to capitalise on the opportunity. Is more aid the solution? Or the problem? This article argues that, beyond the headline-grabbing generalities, development economists are building up a detailed body of empirical evidence specific to individual countries which will shape more effective policy interventions in the years ahead. As in many other areas of applied economics, there is a quiet revolution in what economists know and consequently in their policy advice.
Prospects for Commodity Exporters: Hunky Dory or Humpty Dumpty?
Paul Collier & Benedikt Goderis, World Economics, June 2007
Those low-income countries that export non-agricultural commodities are in the midst of a resource transfer. It is undoubtedly the biggest opportunity for transformative development that these societies have experienced, dwarfing both aid and previous commodity booms. To get it in proportion, in 2004 commodity exports from Sub-Saharan Africa accounted for 146 billion US dollars or 28 percent of the region’s GDP, while aid amounted to 5 percent of GDP. Compared with the boom of the 1970s many more countries are beneficiaries: the push to diversify sources of supply has resulted in exploitable discoveries in places that were previously political no-go areas. Further, whereas the boom of the 1970s was conjured up by the OPEC cartel, this one is grounded in Asian growth and so is intrinsically less precarious. In this paper, the authors draw on a range of new research that provides a prognosis of prospects, a diagnostic of likely problems, and prescribes an agenda for international action. The paper is organized around these three objectives.
Shalendra D. Sharma on the Sachs–Easterly debate.: Can Massive Foreign Aid Eliminate Extreme Poverty?

World Economics, March 2007
There is no summary available for this paper.
Aid for Trade: An essential component of the multilateral trading system and WTO Doha development agenda
Faizel Ismail, World Economics, March 2007
The paper argues that increased Trade and Aid are both essential to enhance the development of many developing countries. It argues further that trade-related technical assistance and capacity building is not only an essential element of the concept of special and differential treatment but is also a core element of the development dimension of the multilateral trading system. The paper provides an overview of the history of the GATT/WTO with a specific focus on capacity building and the developments in 2005 and 2006 that have contributed to the momentum for increased Aid for Trade. The issue of additionality of overall ODA and Aid for Trade is considered and the broad trends in the trajectory of ODA and Aid for Trade are assessed. In the conclusion, three reasons are discussed for developed countries to consider increasing their overall Aid commitments and additional Aid for Trade as a contribution to the successful conclusion of the Doha Round.
Education in a Globalized World
David E. Bloom, World Economics, December 2006
The arguments in favor of education rest on various premises: legal and humanitarian—that children are entitled to an education as a basic human right; economic—that countries will advance faster when people are educated; social and political-that education is essential for building cohesive, equitable, democratic societies; and moral-that devoting resources to education is the “right” thing to do. For decades, countries have worked together in an attempt to ensure that all children get an education, particularly primary education. Falling short, these efforts have been repeatedly renewed. Although enrollment ratios have increased in all developing regions, several regions are likely to fall short of the 2015 goal of universal primary completion. Gender disparities remain high in some regions. Several developing regions are particularly far behind developed ones in secondary and tertiary enrollment, and although enrollment at these levels has been increasing, international efforts have not focused on this. Globalization has offered the biggest rewards to countries that have emphasized education and made improvements at these levels, and it has most benefited individuals who have gained higher-level skills through quality education. In many developing countries, however, the quality of education is low, a fact that has received insufficient attention. Greater investment in education will be needed, but better use of educational funds is also important.
From The Hong Kong WTO Ministerial Conference to the Suspension of the Negotiations: Developing countries reclaim the development content of the WTO Doha Round
Faizel Ismail, World Economics, September 2006
This paper makes an assessment of the WTO Doha Negotiations from the Hong Kong Ministerial Conference until the suspension of the Doha Round at the end of July 2006. The paper analyses the events from a development perspective distinguishing between the perspectives of two broad groups of developing countries; the first that have an interest in an ambitious outcome in the agriculture negotiations; and a second group of developing countries that constitute the least developed and other small, weak and vulnerable economies. The paper concludes by arguing that the suspension of the Doha Round, and the almost certain extension of the round beyond 2006, means that the prospects for the development outcomes of the round to be realized have been postponed once again for both the above groups of developing countries.
Making Fiscal Space Happen!: Managing fiscal policy in a world of scaled-up aid
Peter S. Heller, Menachem Katz, Xavier Debrun, Theo Thomas, Taline Koranchelian & Isabell Adenauer, World Economics, September 2006
Debt relief and the scaling up of aid to low-income countries should allow for increased fiscal space for expenditure programs to spur long-term growth and reduce poverty. But as discussed in Peter Heller’s article “Pity the Finance Minister” (World Economics, Vol. 6, No. 4), designing a suitable medium-term fiscal framework that fosters a sustainable delivery of better public services and infrastructure while maintaining a credible commitment to fiscal prudence raises many challenges. This article first discusses what low-income countries can do to formulate fiscal policy frameworks that are ambitious in their goals for absorbing additional aid while maintaining longer-term sustainability of the expenditure programs and government finances. It then suggests the approaches required to manage the heightened fiscal policy risks associated with a scaled-up aid environment, including issues of coordination with monetary policy. And finally, the article discusses what institutional changes are needed if donors and countries are to facilitate the implementation of a higher level of aid-financed spending programs.
Understanding China’s Economic Transformation: Are there lessons here for the developing world?
Daniel W. Bromley & Yang Yao, World Economics, June 2006
Economic change is a process of continual adjustment to new circumstances. Economies are always in the process of becoming. Good economic policy entails pragmatic adjustment so that economic dystrophy is avoided. The experience of economic (institutional) reform in China since 1978 is drawn on—and explained—to illustrate the extent to which Deng’s reforms represent the pragmatist’s focus on the practical effects of purposeful actions. Economies rest on an evolving institutional foundation. Deng understood this and used it to bring China to the forefront of the world’s economic stage. Here is an account of how he managed that transition.
Russia at the Crossroads: Padma Desai on transition, reform, and the legacy of Yeltsin’s ‘kamikaze crew’
An interview with introduction by Brian Snowdon
World Economics, June 2006
To set the interview in context, Brian Snowdon first traces out some important landmarks in twentieth-century Russian/Soviet Union history. In the conversation that follows, Professor Desai gives her views on a number of key issues relating to the decline of the Soviet system and problems of Russia’s transition to a market economy. Recently, Freedom House has suggested that Russia is at a ‘crossroads’ with respect to its fledgling liberal democracy and market economy. Therefore, also discussed are the prospects for survival of democracy and markets in the new Russian ‘liberal’ order. In the first part of the interview, Professor Desai also comments on the influence of socialist ideas on India’s growth and development strategy.
Book Review: David Bevan on Helping the Poor? The IMF and Low-Income Countries.

World Economics, March 2006
There is no summary available for this paper.
The Enduring Elixir of Economic Growth: Xavier Sala-i-Martin on the wealth and poverty of nations
An interview with introduction by Brian Snowdon
World Economics, March 2006
“I think that the most important question that an economist can ask is, What is it that makes a country grow? More than anything else it is economic growth that affects human welfare…this is why it must remain a major research interest for economists.” In this interview Xavier Sala-i-Martin—widely recognised as one of the world’s leading economists in the field of economic growth—discusses with Brian Snowdon several important issues relating to economic growth and development. The interview, which follows a review of the historical context of recent research, addresses arguments about growth and history, theories and models, globalisation and convergence, political barriers and the ‘natural resource curse’, the impact of religion and culture, and questions of international inequality, foreign aid, human capital, geography, competitiveness, economic and political freedom, and happiness.
Can Iraq Overcome the Oil Curse?
Robert E. Looney, World Economics, March 2006
A growing literature suggests that the oil sector and the allocation of its revenues is the critical variable in shaping both the economic structure and political systems of countries like Iraq. For the most part this literature focuses on the so-called “oil curse” or the “paradox of plenty.” An examination of the Iraqi situation suggests that the country’s current supply-side development strategy will ultimately result in the dominance of “oil cure” effects. In contrast, an alternative demand-oriented approach might be more likely to succeed in the current Iraqi environment.
Corporate China Goes Global
Friedrich Wu, World Economics, December 2005
Recent high-profile international acquisitions and take-over bids by Chinese companies have attracted much media limelight and raised intense interest in China’s rising outward foreign direct investment (FDI). This paper delineates the macro trends of China’s outward FDI based on the most currently available data. It analyzes the size, geographical distribution and motivations of China’s outward investment. It identifies an emerging trend-shift in the globalization strategy of Chinese firms, moving from organic growth to strategic alliance and outright acquisition. The paper weighs the balance between obstacles to, and supporting factors for, the internationalization of Chinese enterprises. Finally, it spells out the mutually-beneficial effects of China’s outward FDI on home and host countries.
Brazil’s Economy Under Lula: The dawn of a new era?
Edmund Amann, World Economics, December 2005
In this article Edmund Amann analyses the recent performance of the Brazilian economy, the largest in South America. For a number of years it has been clear that Brazil, despite substantial natural resource endowments and a talented and entrepreneurial population, has failed to match the growth performance of other emerging market economies, notably those of East and South East Asia. This article examines the structural impediments to accelerated growth which will need to be overcome if Brazil’s economic performance is to improve significantly. While the government of President Lula is well aware of the need for structural reform, it is argued that progress in this field has been slower than desirable. As a result, growth remains constrained and the scope for reducing poverty and inequality restricted.
Monetary Policy, Macro-stability and Growth: South Africa’s recent experience and lessons
Janine Aron & John Muellbauer, World Economics, December 2005
There is greater appreciation now amongst economists of the negative effect of uncertainty on investment, growth and equality, especially when credit constraints are widespread. This implies an important linkage between the transparency and predictability of the policy environment, and growth and equality. The paper begins with a literature survey on the inflation and inflation volatility link, the uncertainty and investment link and the inflation volatility and growth link. This framework is used to examine the experience of South Africa’s new monetary policy regime (inflation targeting, IT) in achieving greater macrostability. South Africa is an interesting case study, being one of the more advanced of the emerging markets with its deep and sophisticated financial system, and yet with around 35 percent unemployment and a legacy of developmental problems from the Apartheid era. The authors demonstrate using evidence from three sources of micro-data that the new monetary regime is more credible, transparent and predictable. They examine the performance of monetary policy and argue IT has not resulted in real interest rate levels that are a hindrance to growth. They explore the better response under IT to big external shocks like exchange rate depreciation, as compared with the monetary regime prior to IT. The paradox is examined of success in achieving macro-stability, where greater household acquisition of debt and increased demand is both inflationary and limits saving, hence constraining corporate investment. The paper concludes with lessons from South Africa’s recent successful monetary policy experience for other emerging market countries and for less developed countries’ central banks e.g., in Africa.
Measuring Global Poverty Right: Mission impossible?
M. G. Quibria, World Economics, December 2005
The international community is committed to millennium development goals which postulate a vision of global development that makes eliminating poverty and sustaining development the overriding objective of global development efforts. In the hierarchy of the MDGs, the first and foremost goal is to reduce by half, between 1990–2015, the proportion of people whose income is less than a dollar a day (a widely used yardstick to measure extreme poverty). However, estimating such poverty across developing countries and globally is by no means a simple exercise nor has it yielded unambiguous results. This article provides a brief summary of the state of the art in global poverty estimates, including the problems as well as the possible solutions.
“Pity the Finance Minister”: Issues in managing a substantial scaling up of aid flows
Peter S. Heller, World Economics, December 2005
Substantial scaling up of aid flows will require development partners to address many issues, including the impact of higher aid flows on the competitiveness of aid recipients, the management of fiscal and monetary policy, the delivery of public services, behavioral incentives, and the rate of growth of the economy. Other issues will include the appropriate sequencing of aid-financed investments, balancing alternative expenditure priorities, the implications for fiscal and budget sustainability, and exit strategies from donor funding. Donors will need to ensure greater long-term predictability and reduced short-term volatility of aid. The international financial institutions can play a critical role in helping countries address these scaling-up issues.
A Global Compact to End Poverty: Jeffrey Sachs on stabilisation, transition and weapons of mass salvation
An interview with introduction by Brian Snowdon
World Economics, December 2005
Brian Snowdon presents the text of a two-hour interview conducted with Jeffrey D. Sachs of Columbia University—a wide-ranging discussion relating to Professor Sachs’s work over the past thirty years on macroeconomic stabilisation, the economics of transition, and several important issues in the field of international economic development. First, Snowdon provides some background to the debate relating to Professor Sachs’s most recent work that has helped focus international attention on the growth tragedy of sub-Saharan Africa. This key humanitarian issue has received enormous coverage in the media throughout 2005 and has been highlighted in particular at the G8 meetings in Gleneagles and worldwide Live 8 Concerts in July 2005, and the UN World Summit in September.
To What Extent Should Less-Developed Countries Enforce Intellectual Property Rights?
Gilles Saint-Paul, World Economics, September 2005
This paper discusses a number of issues in the context of the debate on intellectual property in less developed countries (LDCs). It starts by discussing the consequences of IP enforcement in LDCs for global innovation and welfare in poorer countries. It then considers the costs and benefits of IP enforcement for a small, open LDC, abstracting from global issues. Finally, it discusses the potential merits of an industrial policy based on open-source software. The analysis suggests that the view that it is best for LDCs to free ride on the global IP regime is overblown.
Natural Resource-Based Economic Development in History
Edward B. Barbier, World Economics, September 2005
The role of natural resources in fostering economic development is examined for key historical epochs, from the agricultural revolution in 8,000 BC to the present. Natural resource exploitation has been important to development for most of global history. Depending on which epoch is examined, resource-based development could be viewed as “successful” and sometimes not. Simply because a developing economy or region was endowed with abundant natural resources does not guarantee that its natural wealth is exploited efficiently and generates productive investments. Institutional factors also matter, and environmental conditions may also determine whether or not countries develop “good” institutions.
Paradoxes in Biodiversity Conservation
David Pearce, World Economics, September 2005
Biodiversity is important for human wellbeing, but it is declining. Measures to conserve biodiversity are essential but may be a waste of effort if several paradoxes are not addressed. The highest levels of diversity are in nations least able to practise effective conservation. The flow of funds to international biodiversity conservation appears trivial when compared to the scale of biodiversity loss. International agreements may not actually protect or conserve more than what would have been conserved anyway. Protected Areas may be ‘paper parks’, protected in name but not in practice. The very act of protection may contain self-destructive features because local communities can easily suffer loss of income and assets, making them unwilling partners in the act of protection. In turn, this places the protected area at risk and may also divert unsustainable harvesting activities to non-protected but equally diverse ecosystems. In tackling these issues the real biodiversity challenge is redesigning conservation effort, making it truly additional and making it compatible with poverty reduction.
The Value of Vaccination
David E. Bloom, David Canning & Mark Weston, World Economics, September 2005
Despite advances during the twentieth century, immunization coverage is far from universal and faces significant obstacles in both developing and developed countries. Weak policy emphasis on vaccination may be the result of the narrow view of its benefits in scientific and policy-making communities, which focus mainly on the averted costs of medical treatment. An investigation of the broader impacts of immunization shows that the benefits of vaccine programs—in particular, their economic effects via improved health—have been underestimated, thereby causing the rate of return to be underestimated.
Migration and Development: A new research and policy agenda
Dhananjayan Sriskandarajah, World Economics, June 2005
There is growing interest in the impacts of international migration on economic development. Yet, despite a burgeoning literature, some of the most fundamental questions in this area remain unanswered. This article suggests five priorities for devising better methodologies for understanding the impact of migration and for generating fresh, workable policy interventions that can optimise the impacts of greater mobility on development.
The New Economics of the Brain Drain
Oded Stark, World Economics, June 2005
For nearly four decades now, the conventional wisdom has been that the migration of human capital (skilled workers) from a developing country to a developed country is detrimental to the developing country. However, this perception need not hold. A well-designed migration policy can result in a “brain gain” to the developing country rather than in just a “brain drain” from it, as well as in a welfare increase for all of its workers—migrants and non-migrants alike—as the new research reported here suggests.
The IMF and Low-Income Countries
David Bevan, World Economics, June 2005
There is a wide-ranging debate about possible redefinitions of the role and structure of the IMF itself, and of the Bretton Woods Institutions more generally. This paper has a more restricted focus, on the way in which the IMF interacts with the low-income countries amongst its constituents. It addresses four related topics. The first two are concerned with whether the Fund could remain fully engaged with these countries without actually making loans, and what would be required for it to deliver on its commitment to a more flexible macroeconomic approach. The others examine the Fund’s approach to the debt sustainability issue and the nature of its technical assistance, and how well tailored these are to the circumstances of low-income countries. There is a strong case for strengthening the underpinnings of the Fund’s technical assistance, to develop a more focused low-income analytic perspective, to build its own capacity to assist countries to explore their macroeconomic options, and more systematically to evaluate its technical advice in the light of the outcomes it has helped induce.
Tensions in the Role of the IMF and Directions for Reform
Timothy Lane, World Economics, June 2005
While the International Monetary Fund (IMF) has evolved considerably since its foundation 60 years ago, the past few years have brought fresh challenges. This paper discusses four key areas in which developments have led to a rethinking of the institution’s role: the emerging market financial crises, the changing role of conditionality, the phenomenon of prolonged use, and the search for a clearer role in low-income countries. In response to these challenges, important reforms have been undertaken to strengthen the institution’s effectiveness, but important tensions remain unresolved. The paper discusses the implications for the governance of the institution.
Does the World Need a Universal Financial Institution?
James Boughton, World Economics, June 2005
All financial institutions specialize, in dimensions that may include categories of assets and liabilities, types of services offered, customer demographics, and geographic coverage. The International Monetary Fund is the only international financial institution that is truly universal in its geographic scope, prepared to lend on request to virtually any country in the world. Why has this status come about? What are its costs and benefits? Is it an appropriate model for a world where macroeconomic imbalances, financial crises, and disparities in economic development must compete for attention and resources?
The Nature of Corruption in Forest Management
Charles Palmer, World Economics, June 2005
Corruption is a well-documented and common feature of natural resource management in the developing world. This article investigates the nature of corruption and whether or not there is such a thing as a ‘tolerable’ level of corruption, particularly where there is an established culture of patronage. Using the log trade in Indonesia as a study in rent-seeking transactions, this article shows that a failure to account for the incentives underlying rent-seeking undermines forest policy. Also, attempts to eliminate corruption are doomed to failure. Instead, policymakers should seek to understand the nature of corruption in seeking to move from rent creation to wealth creation.
Rethinking Development Effectiveness: Facts, issues and policies
M. G. Quibria, World Economics, March 2005
This article reviews some recent research on aid effectiveness. An important finding of this research is that foreign aid has been much more effective than is generally presumed. It also suggests that the current aid allocation policy of development agencies, based on selectivity, has a fragile empirical foundation and discriminates against capacity-constrained/geographically disadvantaged countries. To achieve international development objectives, the fundamental basis for foreign aid allocation should be the Millennium Development Goals and national poverty reduction strategies—a bottom-up approach, as contrasted from the top-down method currently being practiced.
Governance Matters: The role of governance in Asian economic development
David E. Bloom, David Steven & Mark Weston, World Economics, December 2004
In recent years there has been a surge of interest in governance: good governance increasingly is seen as a vital adjunct to successful development efforts. This paper attempts to explain what governance is and why it is important, and assess which forms of governance are likely to best support and promote economic development. Although economies with very different governance arrangements have performed strongly in recent decades, a focus on governance is likely to bring out some commonalities that may be helpful for 21st century policy-makers.
Responsible Growth to 2050
Kirk Hamilton & Ian Johnson, World Economics, December 2004
At plausible rates of growth in population and income per capita, world GDP in 2050 could be four times what it is today. This paper considers the benefits this growth can provide, the risks that it presents, and the building blocks required to achieve it. The authors argue that “business as usual” risks unsustainable outcomes. The alternative—responsible growth that sustains environments and supports social development—requires long term thinking if it is to be achieved. Dealing with near-term inequality, improving governance in developing countries, and providing global public goods, particularly vaccine development for tropical diseases and tropical agricultural research, will be key to attaining the prosperous future the authors envision.
Asian Drama: The pursuit of modernisation in India and Indonesia
Tim Lankester, World Economics, September 2004
The now largely forgotten book Asian Drama: An Inquiry into the Poverty of Nations by Swedish social scientist Gunnar Myrdal was published in 1968. Myrdal called his book “Asian Drama” because of the tensions he saw being played out in Asia between modern ideals and the traditional. But there was another drama too— the tension being played out, within the ‘modern project’, between the different economic strategies that were on offer. It is this particular drama that Tim Lankester focuses on in the context of India and Indonesia over the three decades from the mid–1960s. And for both these populous countries, there are dramas still to be played out. Both countries have new elected governments this year, and growth prospects of their economies largely will depend on to what extent remaining reform and governance issues are tackled.
Explaining the ‘Great Divergence’: Daron Acemoglu on how growth theorists rediscovered history and the importance of institutions
An interview with introduction by Brian Snowdon
World Economics, June 2004
Daron Acemoglu is Professor of Economics at the Massachusetts Institute of Technology. In this interview he discusses with Brian Snowdon some of his recent research findings that confirm the key role played by ‘good’ and ‘bad’ institutions in determining the economic performance of countries. He shares his views on a wide range of subjects including economic history, growth theory, the role of institutions and geography in explaining growth and development, the influence of trade on growth, global inequality, and political economy perspectives on economic development.
The Health and Wealth of Africa
David E. Bloom & David Canning, World Economics, June 2004
Among Africa’s problems, chronic poverty and poor health stand out. Traditional development thinking has maintained that health improvements are a consequence of income growth. But new evidence shows that investing in health, with the aid of the international community, could make a big difference in Africa’s economic prospects. Moreover, some feasible, low-cost interventions would likely have high returns. The pathways by which health can make a difference economically include those based on the heightened effectiveness of labor, increased savings, more effective educational investments, and demographic change.
Globalisation and the Asia–Pacific Revival
Arne Bigsten, World Economics, June 2004
This paper reviews evidence on the evolution of international economic integration of Asia–Pacific countries, and discusses the extent to which this explains their recent growth success. It starts with a review of some theoretical arguments in the growth and globalisation debate, which is followed by a presentation of facts about Asia–Pacific international economic integration and growth relative to other regions of the world. The causes of the growth acceleration in the Asia–Pacific region are then discussed, with reflections on the relationships between policy reforms, openness, and per capita income growth. Finally, some tentative conclusions are drawn about future growth in the region.
The Quest for Development: What role does history play?
Areendam Chanda & Louis Putterman, World Economics, June 2004
It may be no coincidence that those countries that grew most rapidly in the late twentieth century—including South Korea, China, and, of late, India—were relatively developed civilizations when Western Europe began its overseas expansion five centuries ago. In this article the authors explore the literature showing that institutions matter to growth, then examine new evidence that the ‘social capability’ to achieve growth is a function of capacities that go beyond the formal education system. Remarkably, a long history of nationhood at the time of Columbus means better odds of growth today.
Beyond the Ivory Tower: Stanley Fischer on the economics of contemporary global issues
An interview with introduction by Brian Snowdon
World Economics, March 2004
Stanley Fischer had a long and distinguished career as an academic economist at MIT, and was Vice President, Development Economics and Chief Economist at the World Bank, before becoming First Deputy Managing Director of the International Monetary Fund in 1994. He is now President of Citigroup International and Vice Chairman of Citigroup. In this interview, Brian Snowdon discusses with Stanley Fischer several important issues relating to the contemporary world economy, including problems of stabilisation, inflation and growth, the economics and politics of transition, exchange rate regimes, the IMF, the East Asian crisis, and globalisation and economic development.
Escaping Regulation, Escaping Convention: Development strategies in small economies
Naren Prasad, World Economics, March 2004
Contrary to widely held belief, small island countries have many lessons to offer to other countries and the world community in terms of their development strategies. This article provides evidence that small island countries are experts at breaking and distorting global trade rules without being noticed or provoking retaliatory actions. As unimportant actors in the global system, they tend to use their sovereignty and non-market options to their advantage rather than relying purely on global rules of free trade. Globalization is neither uniform nor homogeneous, but includes opportunities and potential for derogations, exceptions and special arrangements.
International Aid: Experience, prospects and the moral case
Tim Lankester, World Economics, March 2004
This article describes the main reasons why aid has not been as effective at addressing the world’s poverty problem as it could have been: lack of will on the part of donors, inadequate policies and governance on the part of recipients, and a lack of understanding of development and of how aid works best. It goes on to argue that donors and recipients alike are now better positioned to make aid more effective. However, the current and prospective level of aid is inadequate for the achievement of the Millennium Development Goals. While the moral case for more aid is compelling, it remains to be seen when and whether this will lead to larger aid budgets.
Back to the Future: Jeffrey Williamson on globalisation in history
An interview with introduction by Brian Snowdon
World Economics, December 2003
Jeffrey Williamson is a leading authority on the economic history of the international economy. His interests cover a wide area within the field of economic history and include research on international economic development, the industrial revolution, industrialisation and de-industrialisation, tariff policy, factor price convergence, demography and economic development, and international labour migration. Since the early 1960s he has been a major contributor to the ‘cliometric’ approach to economic history and his research illustrates how history is particularly relevant to the modern debate on ‘globalisation’. In this interview Brian Snowdon discusses with Professor Williamson his more recent research relating to the global economy in historical perspective.
Exchange Rate Regimes: Is there a third way?
Vijay Joshi, World Economics, December 2003
This paper argues that (a) for many developing countries, the optimal external payments regime would be a combination of an intermediate exchange rate with capital controls and (b) the policy stance and advice of the IMF should reflect this judgement. The paper uses India as a case study to illustrate its argument.
How Demographic Change can Bolster Economic Performance in Developing Countries
David E. Bloom & David Canning, World Economics, December 2003
Falling mortality rates spurred by medical, nutritional and lifestyle changes have spurred a ‘demographic transition’ in a majority of the world’s countries. As couples realize their children are more likely to survive, they need, and eventually have, fewer of them to attain their desired family size. In addition, desired fertility tends to decline as earnings opportunities improve since forgone income is such a large portion of the cost of childrearing. In the lag between mortality and fertility declines, a ‘boom’ generation is created, which is larger than both preceding and successor cohorts. As this boom generation reaches working age, the combination of a greater supply of workers and fewer dependents to support gives countries the opportunity to collect a ‘demographic dividend’. If an appropriate policy environment is in place for making the most of this opportunity, the economic benefits can be, and in many cases have been, great.
In Search of the Holy Grail: William Easterly on the Elusive Quest for Growth and Development
An interview with introduction by Brian Snowdon
World Economics, September 2003
Having conducted extensive research in the field of economic growth and development, William Easterly has broad knowledge and expertise on the problems facing developing countries. While working for the World Bank, he travelled extensively in Africa, Latin America and Asia, and is well placed to comment on the key issues and debates surrounding the question of how best to promote increased well-being in the poor countries of the world. In this interview he discusses with Brian Snowdon several of the key controversies that have recently attracted the attention of scholars of economic growth and development.
The Undivided City
James D. Wolfensohn, World Economics, September 2003
Two billion people are set to flood into the already crowded cities of the developing world over the next twenty-five years, mainly to live in the squalid surroundings of a slum or a shanty town and to endure the consequent effects of social injustice and division. James Wolfensohn, President of the World Bank, addresses the problem of urban poverty and describes initiatives for change that build upon a new recognition throughout the developing world that the urban poor have rights, and an essential part to play in building the cities of tomorrow.
The Impact of Globalization on Rural Poverty
Alexander Sarris, World Economics, June 2003
The paper first reviews the meaning and causes of globalization. It indicates that globalization is not a new phenomenon in history, but the current phase seems to have new elements that did not exist previously. Regarding the consequences of the various aspects of globalization at the national level, it is shown that there can be both positive and negative aspects in the short and long runs. However, empirical investigations seem to suggest largely positive implications. The structure of poverty in rural areas is subsequently discussed, and it is shown that rural poverty takes very different forms in different parts of the world. Exploring the various aspects of the incomes of the rural poor, reveals that there are both opportunities, but also dangers of detrimental impacts from global integration. On balance, it appears that globalization creates both opportunities as well as risks, and the impacts on the rural poor will depend on the extent to which they manage to seize the opportunities while managing the increased risks.
Global Challenges of Providing Water and Wastewater Services
Paul Seidenstat, World Economics, March 2003
A key problem of water is the provision of a safe water supply for domestic use. Given the characteristics of water as a commodity, the general misuse of the pricing mechanism, and the economics of developing and operating water and wastewater systems, governments are faced with the challenge of organizing operating systems. The goal is to maximize connections at a reasonable cost and acceptable quality. Developing countries, especially in Asia and Africa, have much work to do to achieve modern water systems. Effective utilization of private water producers may be the most cost-effective approach for many countries.
More Aid—Making It Work for the Poor
Peter S. Heller & Sanjeev Gupta, World Economics, December 2002
This paper highlights the economic challenges that would be associated with a successful effort by industrial countries to meet the goal of devoting 0.7 percent of their GNP to official development assistance (ODA) to help poor countries. To help achieve the Millennium Development Goals, enhanced ODA must be as productive as possible. In weighing the distribution of aid among countries, it is necessary to limit potentially adverse ‘real transfer effects’. A multi-pronged approach to ODA is recommended that includes the use of trust funds and the financing of global public goods, in addition to direct bilateral transfers.
Continuities and Discontinuities in Global Development: Lessons from new East/West comparisons
Kenneth Pomeranz , World Economics, December 2002
Much literature normalises a ‘North Atlantic’ pattern of development, and sees a regionally specific ‘East Asian’ path emerging relatively recently. However, development patterns in core regions of Europe and East Asia were surprisingly similar until almost 1800; Europe’s subsequent divergence was shaped by exceptional resource bonanzas. East Asian growth has been less resourceintensive, and more continuous with pre-1800 patterns. Since 1978, ‘East Asian’ patterns again characterise coastal China, but China’s interior poses greater challenges; current interest in more resource-intensive, state-driven development strategies for those regions is thus unsurprising, but environmentally and socially risky.
The Puzzle of the Harmonious Stock Prices
Randall Morck & Bernard Yeung, World Economics, September 2002
A peculiar pattern is evident across the stock markets of different countries. In emerging markets, such as Peru and China, all the stocks in the country tend to rise and fall together in the course of ordinary trading. But in developed countries, such as Denmark and Canada, stocks move independently. What seems to determine how independently a country’s stock prices move is not the size of its market, the diversification of its economy, the stability of its macroeconomic policy or factors relating to the behaviour of individual firms. Rather, stock prices move more independently in countries that are less corrupt.
Can Africa Catch Up?
Arne Bigsten, World Economics, June 2002
The trend towards globalization of the last few decades has been manifested in the sustained growth of world trade and flows of investment and technology. For most regions this growing integration has led to rapidly growing per capita incomes, while Africa has stagnated at the income level achieved about three decades ago. This paper shows that Africa is marginal to the world economy, but that the world economy is very important for Africa. In terms of openness to trade Africa closed up during the 1960s and 1970s, while it has been trying to open up since then. So far the results in terms of growth have been modest. The question posed here is whether Africa can effectively link up with the rest of the world and start a catch-up process, or whether marginalisation is inevitable.
Policy-Making in Resource-Rich Countries: Lessons from Zambia
Arne Bigsten, World Economics, September 2001
Economic development depends upon resource availability, resource allocation, and the efficiency of resource use. One would presume that countries with an abundance of natural resources would stand a better chance of developing than resource-poor countries. Recent experiences in less developed countries show, however, that countries with an abundance of natural resources have grown at a slower pace than countries with scarce natural resources. Zambia is a case in point. Its economy has been based on copper mining, but over the last three decades per capita incomes in Zambia have been halved. This paper shows how policy-making in such a resource abundant economy is biased by the availability of resource rents. It further discusses the implications for the policies of international financial institutions and other donors in such a setting, and the possibilities for the domestic process to sustain a system of good governance.
NGOs and International Economic Policy-Making: Rights and responsibilities in the global arena
Michael Edwards, World Economics, September 2001
NGOs and other citizens’ groups are enjoying an unprecedented upsurge in their profile and influence in global debates over international economic policy. Public opinion polls show this to be a popular trend, but the outcome of greater civil society involvement depends on whose voices are actually represented in global debates, how competing interests are reconciled, and whether NGOs are effective in playing their roles in the international system. Unless the process of civil society engagement is properly managed, the result may be gridlock. This article outlines the strengths and weaknesses of NGO involvement and suggests a number of avenues for improvement in the future.
The Debt-Relief Initiative for Poor Countries: Good news for the poor?
Gustav Ranis & Frances Stewart, World Economics, September 2001
This paper reviews the new debt-relief initiative for Highly-Indebted Poor Countries (HIPCs) designed to reduce the debt burden of potentially 36 poor countries. It finds that the HIPC initiative is not likely to make a major contribution to the problems of the world’s poor. It offers limited and highly conditional resources, most of which are not likely to be additional to existing resource flows; the resources are not distributed according to need; and the policy packages accompanying HIPC are unlikely to do much for the major development problems that are constraining these countries’ development efforts. A major problem with the initiative is that it excludes all the populous poor countries, so that the vast majority of the poor of the world will not be touched by it.
Global Income Inequality: Beliefs, facts and unresolved issues
Arne Melchior, World Economics, September 2001
While several international organisations have argued that income gaps between countries have increased during the last decades, the opposite conclusion is obtained if countries are weighted according to their population size, and if price-level-adjusted income data are applied. Inequality measures that give higher weight to the poorest countries also support this conclusion. Due to falling incomes in a number of poor countries, however, the gap between the richest and poorest countries has widened, and unambiguous conclusions about welfare are difficult to draw.
Redefining the Role of the State: Joseph Stiglitz on building a ‘post-Washington consensus’
An interview with introduction by Brian Snowdon
World Economics, September 2001
An interview with introduction by Brian Snowdon
Professor Joseph Stiglitz is without question one of the world’s leading economists. In his extensive research he has made seminal contributions to the analysis of the economic consequences of incomplete information and uncertainty. This work has greatly enhanced economists’ understanding of the welfare properties of markets and the sources of market failure. His research has also contributed to the development of better microeconomic foundations for Keynesian macroeconomic models. Most recently Professor Stiglitz has been heavily involved in controversial public policy debates relating to the East Asian crisis, problems of transition from communism to capitalism, the limitations of the ‘Washington consensus’, and globalisation and development. A common theme in all of these debates relates to the role of government and legitimate borders of the state in both developed and developing economies. In this article/interview Professor Stiglitz gives his views on these and several other important global issues.

IMF Programmes: Is there a conditionality Laffer Curve?
Graham Bird, World Economics, June 2001
The long-standing debate over IMF conditionality has received a new lease of life in the context of the debate over a new international financial architecture. Conditionality has increased in recent years and some proposals for reform envisage a continuation of this trend. However, by emphasising the importance of implementation as well as design it may be argued that increased conditionality will have a negative effect on final out-turns; there may be a conditionality Laffer curve. The policy issue is whether conditionality has reached or gone beyond its optimal level. There is some evidence that is consistent with the claim that conditionality has become excessive.
The Emerging Northeast–Southeast Asia Divide and Policy Implications
Friedrich Wu, World Economics, March 2001
Since the outbreak of the Asian financial crisis in mid-1997, the gulf between the Northeast Asian economies and Southeast Asian economies has widened as measured by GDP growth rates and size, direct and portfolio investment flows, stock market capitalisation and trading turnover, as well as foreign exchange reserves. The growing divide between the two regions can be explained by four factors, namely: political-risk differentials; different paces in economic restructuring and financial reforms; China’s allure in post-WTO entry; and the technological gap between the two regions. To recapture competitiveness, the Southeast Asian economies need to pursue the following policy responses with some urgency: re-establish a more stable political environment; accelerate market-oriented reforms and liberalisation; and fine tune incentives to attract foreign investment.
Child Labour: Theory, policy and evidence
Saqib Jafarey & Sajal Lahiri, World Economics, March 2001
The purpose of this paper is to pull together the emerging theoretical and empirical literature on the economics of child labour, and to draw out the underlying commonalities between various contributions in this field. In doing so, the authors also identify various policy options and their relative merits.
Hardship and Happiness: Mobility and public perceptions during market reforms
Carol Graham & Stefano Pettinato, World Economics, December 2000
This paper focuses on an age-old puzzle: why some societies peacefully tolerate high levels of inequality and others do not. The authors posit that opportunity and mobility over time are as important as current distributions are to the explanation. Assessments of past mobility and future expectations are as important as objective trends. An analyze of data for Latin America compares subjective assessments with objective trends during a period of volatility and policy change. 
It was found that relative incomes matter as much as absolute ones. Expectations of future upward mobility were higher in countries with more inequality. Upwardly mobile people were more critical in their self assessments than were less mobile people. Collective memory of macroeconomic volatility was critical to subjective assessments of future prospects: those countries with recent crises and reforms had the highest levels of support for market policies. The effects of expectations on self-assessments have methodological and analytical implications for political economy research.

The International Economic System in the Twentieth Century: An interview with Barry Eichengreen
Brian Snowdon, World Economics, September 2000
This wide-ranging discussion takes in globalisation, the causes of the Great Depression (and the likelihood of future recurrences), the Marshall Plan and post-war European recovery, growth in the 1950s and 60s followed by the problems of the 70s, and the strengths and weaknesses of the current international financial system, among other subjects. It provides a stimulating introduction to factors underlying important events in the history of the twentieth century and prospects for the century we have just entered.
False Attack: Misrepresenting the Human Development Report and misunderstanding the need for rethinking global governance
Richard Jolly, World Economics, September 2000
In this rejoinder to David Henderson’s article "False Perspective: the UNDP view of the world" (World Economics Vol 1 No 1 January-March 2000), Richard Jolly, former special adviser to the Administrator of the United Nations Development Programme, argues that Henderson’s criticisms of the UNDP’s Human Development Report 1999 are both misguided and misdirected, are dangerously complacent in suggesting that global governance needs no reforms, and take little account of the Report’s wider perspectives of human development and globalisation.
False Perspective: The UNDP View of the World
David Henderson, World Economics, March 2000
Despite some searching and unanswered criticisms of its treatment of statistical evidence, the UNDP Human Development Report has become established as a widely-quoted and influential survey of the world scene. The 1999 Report, reviewed here, focuses on ‘globalization’. This is described as a dominant influence on the recent economic fortunes of developing countries in particular, and as a primary cause of continuing poverty and growing inequality in the world. The author argues that the Report provides neither argument nor evidence in support of this thesis; that it takes no account of other factors that have strongly influenced economic performance; that its main prescription for the world, of reforms in ‘global governance’, is largely beside the point; and that its whole approach is crudely anti-liberal. The author concludes by placing the Report, as also the economists who have aligned themselves with it, in the wider context of anti-liberalism today.