Posted by Ignacio on
Fri, 27/04/2007
Like every Friday, from Raj Nallari and Breda Griffith's lecture notes on Economic Policies for Poverty Reduction.
The unacceptably high mortality rates in the least developed countries can be improved by the control of communicable diseases and enhancing maternal and child health. HIV/AIDS, malaria, tuberculosis (TB), childhood infectious diseases, maternal and prenatal conditions, micronutrient deficiencies and tobacco-related illnesses represent the main causes of (avoidable) deaths in low-income countries (CMH, 2001). Widespread disease also stunts the exploitation of arable land, migration and trade. Bad health stymies job productivity and an individual’s ability to learn and to grow intellectually, physically and emotionally. Through all these channels, ill health pushes the poor deeper into poverty. If disease was controlled so that individuals could reap longer and healthier lives, the pressure to have many children would abate and families could invest more in the health of each child. These improvements in health would in turn translate into higher incomes, higher economic growth and reduced (and more sustainable) population growth.
A healthy individual is more likely to be more productive than an unhealthy one. Better health increases per capita income through at least three channels. These are:
- altering decisions about spending and saving over an individual’s life-cycle;
- encouraging foreign direct investment; and
- increasing the incentives for investing in education.
An individual is less likely to save for retirement when mortality rates are high. Falling mortality rates in many developing countries has opened up new incentives to save that impact dramatically, at least before populations begin to age, on national saving rates. The impetus from the national savings rates boosts investment rates and increases per capita income. Foreign investors are more likely to shun environments in which the labor force suffers from a high disease burden. Whole industries in agriculture, mining, manufacturing and tourism suffer from a lack of investment when disease is prevalent. Moreover, infrastructure projects suffer from a lack of investment also in high disease environments. Furthermore, endemic disease, such as river blindness, prevents individuals from exploiting land and other natural resources. Reduced mortality rates also make investment in education more appealing, as healthier children have higher rates of school attendance and higher cognitive abilities. A number of studies have shown the positive effect of health and nutrition on school attendance and cognitive ability (Balasz et al. (1986), Pollitt (1997, 2001), Bhargava (1997), Kremer and Miguel (1999)).
Exhibit below examines the vicious cycle that can be set in motion when bad health leads to further impoverishment and further ill-health. Poor health reduces GDP per capita by reducing labor productivity from reduced investment in physical capital, reduced access to natural resources and the global economy and reduced schooling and impaired cognitive capacity. GDP per capita is also lowered by a reduced labor force stemming from high mortality due to adult illness and malnutrition and early retirement. The higher dependency ratio stemming from the reduced labor force and higher fertility and child mortality directly feeds into lower GDP per capita. The HIV/AIDS epidemic in Sub-Saharan Africa has already begun to impact on higher levels of adult mortality. The effect of HIV/AIDS on GDP per capita could eventually follow the pattern described by the exhibit below with consequent adverse effects for investment, education, and saving for retirement.
Health’s Links to GDP
Source: Bloom, Canning and Jamison, 2005
Posted by Ignacio on
Thu, 26/04/2007
In a speech to the Chicago Council on Global Affairs, Barack Obama pledged to double US aid by 2012, if elected President.
For the last twenty years, U.S. foreign aid funding has done little more than keep pace with inflation. Doubling our foreign assistance spending by 2012 will help meet the challenge laid out by Tony Blair at the 2005 G-8 conference at Gleneagles, and it will help push the rest of the developed world to invest in security and opportunity. As we have seen recently with large increases in funding for our AIDS programs, we have the capacity to make sure this funding makes a real difference.
John Edwards also made his Global Poverty Proposal recently.
Hillary?
(Via Owen, Steve Radelet also writes about it at the CGD)
Posted by Ignacio on
Wed, 25/04/2007
Posted by Ignacio on
Mon, 23/04/2007
We have blogged about migrant remittances in the past, from an economic point of view.
The New York Times magazine (for members) includes this week an excellent article on remittances that looks at the personal stories behind migration and at its costs and benefits. Jason DeParle's article focuses on the Philippines, a country with 10 percent of its population living abroad and where remittances make up 14 percent of its GDP.
With about one Filipino worker in seven abroad at any given time, migration is to the Philippines what cars once were to Detroit: its civil religion. A million Overseas Filipino Workers — O.F.W.’s — left last year, enough to fill six 747s a day. Nearly half the country’s 10-to-12-year-olds say they have thought about whether to go. Television novellas plumb the migrants’ loneliness. Politicians court their votes. Real estate salesmen bury them in condominium brochures. Drive by the Central Bank during the holiday season, and you will find a high-rise graph of the year’s remittances strung up in Christmas lights.
Across the archipelago, stories of rags to riches compete with stories of rags to rags. New malls define the landscape; so do left-behind kids. Gain and loss are so thoroughly joined that the logo of the migrant welfare agency shows the sun doing battle with the rain. Local idiom stresses the uncertainty of the migrant’s lot. An O.F.W. does not say he is off to make his fortune. He says, “I am going to try my luck.
More information on remittances at the World Bank website.
Posted by Ignacio on
Fri, 20/04/2007
As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes on Economic Policies for Poverty Reduction.
Health, Poverty Reduction and Economic Growth
The opportunity to receive basic health care is a critical component of personal development as well as a key factor for economic progress (Sen, 1999) and is a basic human right that is protected by international law. Yet for millions of the world’s poor this basic right remains out of reach. Developing countries account for 90 percent of the world’s disease burden (Gottret and Schieber, 2006). Roughly, 16 million deaths in 1998 were directly attributable to communicable diseases such as HIV/AIDS, malaria, tuberculosis, and maternal and prenatal conditions, childhood infections, tobacco-related illnesses and nutritional deficiencies (WHO, 2006). Almost 11 million children under age 5, mostly in developing countries died from diseases in 2000—8 million of these were infants, half of whom were just 1-month old or less. Yet the diseases are treatable and technologies exist to prevent deaths. The cost in terms of economic growth, stability, increasing poverty and pushing the poor further into poverty is increasingly being acknowledged as unjust and being acted upon at the international level. The international community’s commitment to the Millennium Development Goals, three of which are directly related to health, attest to international acceptance that investment in health is vital to human development and economic growth.
This and upcoming Fridays we will examine health within a macroeconomic context and the current status of development assistance for health.
Macroeconomics and Health
Placing health within a macroeconomic framework has been a recent phenomenon in developing economies. Critics of the old structural adjustment facility, the SAF, noted its lack of emphasis on health in programs that targeted macroeconomic adjustment and structural reforms. The increasing emphasis on poverty reduction by the international financial community in recent years has, however, recognized the role of health for economic growth and development. Initiatives such as the PRSP in 1999 and the HIPC Initiative now recognize the importance of health to poverty outcomes in developing economies. The World Health Organization’s “Commission on Macroeconomics and Health” was set up to analyze the impact of health on development by examining the ways in which investment in health could tackle mass premature death and thereby improve economic development. Furthermore, the move in recent years to global initiatives tackling health concerns—Global Alliance for Vaccines and Immunizations (GAVI), the Global Fund for AIDS, TB and Malaria—underlies the critical relationship between health, poverty reduction and economic growth. In addition, as outlined above, health issues occupy three of the Millennium Development Goals and contribute to the achievement of all the others.
The disparity in health indicators among the various country development categories is stark, as shown in the exhibit below. The population in the least developed countries and in lower-middle income group in which many of the world’s poor live (e.g., India, China) was approximately 3.3 billion in 2003. An individual born in a least developed country can expect to live only to the age of 51 compared to 78 in a high-income country. The health indicators for Sub-Saharan Africa have worsened dramatically over the study period. Life expectancy at birth has fallen from 51 to 46 years of age and infant mortality deaths before the age of 1 per 1000 live births have increased from 92 to 101. Under five mortality rates have likewise worsened in Sub-Saharan Africa from 151 to 171 per 1000 live births. By contrast, life expectancy has improved or remained constant for the remaining country groupings, as have mortality rates.
Life Expectancy and Mortality Rates by Country Development Category (1995-2000) and 2003
Posted by Ignacio on
Thu, 19/04/2007
This is a collection of case studies that describe experiences by practitioners in the ground and ideas that have worked reducing poverty in the South Asia region. We can draw lessons from these success stories that could be applicable in other parts of the world.
In the presentation of the book today, Deepa Narayan warned against the temptation to apply literally the same projects in other countries, but mentioned four overall lessons from the book:
Posted by Ignacio on
Wed, 18/04/2007
According to Mwangi S. Kimenyi in the latest issue of Poverty in Focus, trying to "highlight the importance of thinking about the poor as people rather than mere numbers and getting a better understanding of the economy and the linkages within sectors and regions".
Pro-poor reform policies should:
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Target activities which most poor are involved in, and because markets of the poor are generally not well integrated with other formal markets, pro-poor policies must influence markets of the poor directly and should not be based on assumed leakages from other sectors.
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Focus on improving the functioning of markets where poor people participate.
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Target low skill, labour intensive economic activities.
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Seek to reduce market segmentation so that markets for the poor are better integrated in the economy. This means improving on the forward and backward linkages.
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Ring-fence public expenditures for raising capabilities of the poor.
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Target those groups that operate outside the markets with the aim of creating markets.
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Include a food security policy.
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Include policy initiatives that protect vulnerable populations from large swings in welfare.
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Include policies that support accumulation of tradable assets by the poor.
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Include institutional reforms that empower the poor through progressive diffusion of power.
By the same author:
Economic Reforms and Pro-Poor Growth: Lessons for Africa and other Developing Regions and Economies in Transition
Posted by Ignacio on
Mon, 16/04/2007
World Development Indicators (WDI) 2007 is out.
WDI is the World Bank's premier annual compilation of data about development. The 2007 WDI includes more than 900 indicators in over 80 tables organized in 6 sections: World View, People, Environment, Economy, States and Markets, and Global Links.
According to the data, 1 billion people, or 18.4 percent of the population, lived under extreme poverty (less than $1 a day) in 2004. Nothing to celebrate about that figure, except the fact that it has been decreasing, from 1.25 billion in 1990. The rate of people living on $2 a day has been falling too, but 2.6 billion people (almost half of the population in the developing world) were still living below that level in 2004.
Developing countries have averaged a 3.9 percent annual growth in GDP per capita a year since 2000, which contributed to rapidly falling poverty rates in all developing regions over the past few years. Another key factor in the reduction of worldwide poverty rates has been China's massive poverty reduction between 1990 and 2004.
The report finds that, in the past decade, poverty reduction was not always or everywhere commensurate with income growth. In some countries and regions, inequality worsened, as poor people did not reap the fruits of economic expansion, because of a lack of job opportunities, limited education or bad health.
Read the full press release
Access the WDI 2007 website
For full time series database access, subscribe to WDI Online
Posted by Ignacio on
Fri, 13/04/2007
As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes on Economic Policies for Poverty Reduction.
Official Development Assistance for Education
In order to achieve the MDG in education, external financing from the donor community will need to be stepped up. Furthermore, based on the needs assessment of developing countries, a better targeting of assistance is required as well as a change in the mix of assistance and a greater efficiency of aid transfers (Bruns, Mingat and Rakotomalala (2003). Recent developments such as the HIPC Initiative (1999), the PRSP process and the Fast Track Initiative (2002) should make it a little easier for developing countries to move towards UPE.
Under the HIPC Initiative some of the resources that become available when debt is cancelled are available for increased social spending. Mingat and Winter (2005) note that in Madagascar education spending as a proportion of GDP is expected to increase from 2.2 percent to 3.4 percent in 2005, with about a third of the increase arising from resources freed up under HIPC. Fredriksen (2005) notes that countries benefiting from HIPC have committed to use an average of 40 percent of their debt payments savings on basic education. A recent review shows that countries are largely meeting this commitment. Furthermore, the preparation of the PRSP make it a central instrument for government to identify and address policy reform for education in the context of a country’s macroeconomic framework and its social and poverty reduction goals.
The Education for All (EFA) Fast Track Initiative (FTI) was agreed by developing countries, donor countries and agencies in 2002. Its aim is to help achieve the goal of universal primary school completion by boys and girls by 2015. The FTI functions as a co-coordinating mechanism for disbursing funds once a country has been accepted to the FTI (by submitting a country plan for education). It meets regularly to review education plans at the international and country levels and thus is an important forum for debating what works and does not work in achieving EFA. FTI has co-ordinated with UNESCO to develop uniform benchmarks for an EFA plan. The suggestions include the allocation of 20 percent of national budgets to education, the elimination of school fees, a target of 40:1 student-teacher ratio and repetition rates not above 10 percent. The FTI has been instrumental in mobilizing more resources as well as promoting more effective resource use through better programs and closer donor coordination, but has been criticized for not doing more to bridge the financing gap (Sperling and Balu, 2005).
Despite increases in commitments of US$348 million in 2005 to 12 countries included in the initiative, an annual financing gap of US$289 million remains. Moreover only 8 of the countries identified as being off-track for reaching UPE by 2015 are included in the FTI. However, the reality is that donors only give US$1.9 billion for education worldwide while the gap between what countries spend and what they need for UPE ranges from US$5 billion to US$10 billion. Sperling and Balu (2005) note further that no donor country has made FTI or even EFA a high priority, although some recent initiatives such as the UK’s Commission on Africa and the UN Millennium Project Task Force on Gender Equality and Education issued reports calling for predictable funding through the FTI.
External levels of financing have increased for education, although current levels of aid fall far short of requirements. Under IDA, lending for education has grown steadily to almost US$1.2 billion in 2004. Roughly 86 projects were under implementation in 2005 amounting to nearly US$4.3 billion. Africa accounted for 40 percent of the total and Asia accounted for 20 percent. Support for primary education amounted to almost half of total lending over 1999 to 2003.
Africa has the greatest disparity between current levels of assistance and what is needed to achieve UPE by 2015. 33 African countries account for US$1.9 billion of the US$2.4 billion per year gap (excluding Afghanistan); yet official disbursements have averaged US$500 million per year over 1998 to 2000, with new commitments averaging just US$600 million per year.
Official Development Assistance to Basic Education in Sub-Saharan Africa, by Donor, 1998-2000 (commitment basis, millions of current US$)
 Source:Bruns, Mingat and Rakotomalala
Next week we will start looking at the relationship between health, poverty reduction and economic growth
Posted by Ignacio on
Thu, 12/04/2007
The International Monetary Fund's latest World Economic Outlook is out.
The World Economic Outlook (WEO) presents the IMF staff's analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects.
Posted by Ignacio on
Wed, 11/04/2007
There have been numerous discussions recently on the need (or lack thereof) of more aid for developing countries. An article in the Economist reminds us that the quality of aid is as important as its quantity.
After the Indian Ocean tsunami, according to a report in El Pais, an Acehnese girl developed measles symptoms thanks to three identical jabs from different aid agencies.
Although an extreme case of negligence, this is a very graphic example of how donors’ competition to have their flag planted on projects can have unintended consequences for those they want to help in the first place.
The Paris Declaration on Aid Effectiveness remains critical but, according to the article, progress is weak on its goals of harmonizing donors’ policies and aligning them with the priorities of the governments.
Donors also remain intrusive, cumbersome and rivalrous in their giving. Far from slipping money quietly under doors, they are forever inviting themselves in to nose around. The OECD reckons that, between them, 31 poor-country governments received 10,837 donor “missions” in 2005, almost one a day. Even those that explicitly asked for “quiet periods” to get on with their real work were not spared.
Related
A recent conference at the World Bank discussed the Division of Labor among Donors. Watch the video.
(Via Owen)
Posted by Ignacio on
Mon, 09/04/2007
The ECA and the African Development Bank are organizing the 2007 African Economic Conference on the theme “Opportunities and Challenges of Development for Africa in the Global Arena”, which will take place in Addis Ababa on 15-17 November. The program committee invites submission of abstracts (or papers) by interested participants on any economic issues of relevance to African economies.
Deadline to submit abstracts is April 30.
Full announcement and contact information.
Posted by Ignacio on
Fri, 06/04/2007
As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes on Economic Policies for Poverty Reduction.
Achieving the MDG in education will depend on financial and non-financial considerations. Bruns et al., identified for 55 low-income countries several characteristics of the education system that are widely held to influence outcomes in terms of enrollment and completion rates:
· average annual teacher salary
· pupil-teacher ratio
· spending on inputs other than teachers
· average repetition rate
· government revenues
· education recurrent spending
· primary education recurrent spending
· private enrollments
Benchmarks for Primary Education Efficiency and Quality
aGovernment current revenues, excluding grants; bStaggered targets proportional to per capita GDP
cFor six-year primary cycle; otherwise prorated for length of cycle
Source: Bruns, Mingat and Rakotomalala, 2003
Enormous variance in these indicators was found across the 55 countries. The variations translated into huge variance in GER (ranging between 30 and 120 percent) and primary completion rates ranging between 20 and 100 percent. Based on these data, three stylized groups were identified. Group 1 countries were deemed relatively “successful countries” with GER of 85 percent and above and PCR of 70 percent and above. Group 2 countries that were deemed “high inefficiency countries” with high GER (80 percent or above) but low PCR (60 percent or lower); Group 3 countries, or “low coverage countries” with low GER and PCR (both 60 percent or lower) and Group 4 countries that fell within the ranges of the other three groups. Exhibit below demonstrates.
Primary School Completion Rates and Gross Enrollment Ratios in a Sample of Low-Income Countries, c.1990-2000
The relatively good features of the Group 1 countries provide some benchmarks to which Group 2 and Group 3 countries could aspire. Group 1 countries were more likely to:
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Devote a higher share of their GDP to public primary education;
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Have unit costs that fell in the middle of the range;
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Pay teachers an average annual wage of 3.3 times per capita GDP;
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Have slightly higher spending on complementary, non-teacher salary inputs;
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Have an average pupil-teacher ratio of 39:1; and
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Have average repetition rates below 10 percent (Bruns, Mingat and Rakotomalala, 2003).
Group 2 countries had lower average spending and much higher repetition rates (28 percent compared to less than 10 percent for Group 1 countries) and Group 3 countries had hugely higher unit costs—about 70 percent higher—than the other groups, primarily due to higher average teacher salaries. Based on these findings, the challenge for countries with low PCR and low GER is clear and relies on greater domestic effort, both in terms of financing and reform.
However, as noted generally and more specifically based on simulations by Bruns, Mingat and Rakotomalala (2005), many countries are not in a position to mobilize the resources needed to achieve UPE by 2015. Low income countries have a small tax base and have difficulty raising revenues due to limited administrative capacity. Public spending on education in low-income countries ranges from less than 2 percent of GNP in Chad, Guinea, Guatemala, and Lao People’s Democratic Republic to 10 percent in Botswana and Namibia (Mingat and Winter, 2005). Spending on primary education varies widely among the regions, ranging from US$46 per head in South Asia to US$878 per head in Eastern Europe and Central Asia. Usually more money for education results in better education, although this is not a foregone conclusion (Cohen and Bloom, 2005). Mingat and Winter (2005) note that Senegal and Burkina Faso spend almost the same on each primary school student, yet achievement is much higher in Burkina Faso. Moreover, more money for education does not always mean more coverage—public spending on education in El Salvador, Ghana and Sri Lanka is a relatively small proportion of their respective GDPs, yet the coverage is wide.
Posted by Ignacio on
Thu, 05/04/2007
According to UNECA's latest edition of the Economic Report on Africa (ERA 2007), African economies are forecast to grow by an average of 5.8% in 2007.
From the press release:
The report, titled “Accelerating Africa's Development through Diversification,” notes that African economies continued to sustain the growth momentum of previous years, recording an overall real GDP growth rate of 5.7% in 2006. 28 countries recorded higher economic growth rates in 2006 than 2005.
According to the report, Africa's recent growth performance was underpinned by improvements in macroeconomic management in many countries as well as strong global demand for key African export commodities, resulting in high export prices, especially for crude oil, metals and minerals.
Factors that are likely to hinder growth in the future include lack of diversification of production and exports as well as instability and vulnerability to shocks, and the increasing spread of the HIV/AIDS pandemic, which undermines labour supply and labour productivity. In addition, inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy networks at the regional level will continue to undermine the productivity and international competitiveness of African economies.
En Français
Posted by Ignacio on
Mon, 02/04/2007
The Department of Economics at the University of Copenhagen and its Development Economics Research Group (DERG) is organizing the next Nordic Conference in Development Economics (NCDE) to be held in Copenhagen on 18-19 June 2007. The conference aims at bringing together Nordic and international scholars for exchange of ideas and discussion of recent results within theoretical and applied development economics research. The organizers particularly encourage young researchers based in the Nordic countries (independent of nationality) to submit papers on all topics within the field of development economics.
More information and how to register here.
Deadline to submit papers is May 1, 2007.
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