PSD Blog - The World Bank Group

Fighting climate change through trade liberalization

The Institute of Public Affairs, a free market-oriented think tank in Australia, has issued a mini-manifesto on combating climate change. In Undermining Mitigation Technology, Tim Wilson puts forth two arguments about how best to develop and spread new technologies to combat climate change. His big argument is that patent rights ought not to be violated. I think that part of the argument will prove contentious.

More interesting to me is Wilson's argument that trade barriers present a significant obstacle to the diffusion of mitigation technology. This one looks like a no-brainer. In his own words:

The global market for environmental goods and services is worth between USD$550 billion and USD$613 billion per annum. Of this figure, 35 per cent is in goods and 65per cent in services. Yet some countries impose tariffs of up to 70 per cent on these technologies. In Asia and Latin America the average tariff on environmentally sensitive technologies is between 15 and 20 per cent. If the governments of developing countries want to promote the transfer of CO2 mitigation technologies, they can do something immediately—remove their tariff barriers.

Economic detectives track down corruption

Just how far has the international development community come in its attitudes toward corruption? Here are classic lines from Samuel Huntington's 1968 opus Political Order in Changing Societies:

In terms of economic growth, the only thing worse than a society with a rigid, overcentralized, dishonest bureaucracy is one with a rigid, overcentralized, honest bureaucracy. A society which is relatively uncorrupt...may find a certain amount of corruption a welcome lubricant easing the path to modernization.

Nowadays, the work of organizations like Transparency International has made such attitudes seem heretical. Yet even the best efforts of organizations like Transparency International have yet to put a huge dent in corruption around the world, despite achievements such as passage of the OECD's Convention on Combating Bribery. Two economic detectives propose a new strategy for combating corruption in an article in the newest Foreign Policy entitled How Economics Can Defeat Corruption (subscription required).

Democracy and growth

Although it's not a new paper, I thought it would be good right about now to dig up a little bit of wisdom from Dani Rodrik and Romain Wacziarg called Do Democratic Transitions Produce Bad Economic Outcomes? The short answer is no. But I'll let them speak for themselves:

We show in this paper that the data do not support the view that democratization is bad for economic performance. Our analysis reveals that major democratic transitions have, if anything, a positive effect on economic growth in the short run...this is especially true for the poorest countries of the world and those that are marked by sharp ethnic divisions.

Aid as colonialism

Althought the point has been made before, Foreign Policy has some searing words for the aid industry in a piece called The New Colonialists (subscription required). Money quote:

Many aid organizations will say that their ultimate goal is to ensure their services are no longer needed. But aid organizations and humanitarian groups need dysfunction to maintain their relevance. Indeed, their institutional survival depends on it...it is difficult to find examples where these groups have pulled up stakes because the needs they seek to address are no more.

Winning gold

August 25, 2008. I didn’t see it, but I heard it. Everybody heard it. On the last day of the Olympics, Mongolia won its second gold medal. When Badar-Uugan Enkhbat, a 23-year old boxer, slammed Cuba on Sunday afternoon, Ulaanbaatar simply erupted. It seemed that the entire city celebrated: shouting, cheering, honking horns, and flag-waving. Young men stood on moving cars, holding flags, and somehow managing to keep their balance.

It is wonderful to see the entire country so happy. Ten days ago, when Tuvshinbayar Naidan won the gold in judo, the entire country celebrated its first-ever Olympic gold. The second gold medal puts Mongolia either at or near first place in gold medals per capita. Chuck Culpepper pointed out in the Los Angeles Times that for Mongolia, with only 2.9 million people, to win gold means much more than the United States or China, with their large populations, to win their 30+ gold medals. Spot on.

Doing Business in India

Doing business in India may be getting easier in the not too distant future. An article in the Business Standard talks about a proposed law that aims to speed up the enforcement of contracts (Hat tip: Dahlia Khalifa). And what prompted this interest in a new law? You guessed it:

The Centre had taken notice of the World Bank’s Doing Business Report 2007, which said that it takes as many as 1,420 days in India to implement a financial contract. The report had given India an overall ranking of 177 in the report, a rank that remained unchanged in 2008.

In China, a rising tide lifts all boats

At least that's the new finding from PREM in a paper on Rising Income Inequality in China. Coauthors Xubei Luo and Nong Zhu do a lot of number crunching using the China Economic, Population, Nutrition and Health Survey and find that while inequality has risen rapidly in China, strong growth has meant that all income groups have seen pretty substantial economic gains. Figure 1 provides a pretty clear picture of the rise in inequality as measured by the Gini coefficient:

 

Text messaging - the real revolution in telecommunications?

While we may not be ready to announce victory in the digital war on poverty, there are definitely battles that are being won. And the most recent battle is that over text messaging. Cell phones have spread like wildfire across Africa and many other parts of the world. But these are basic handsets - no internet access, no videos, no maps. These phones do, however, have short message service (SMS), aka text messaging. And while the capacity to send 160 characters by phone may not be a revolution, it is definitely having a positive impact.

Jim Witkin, writing at Triple Pundit, discusses one of the most interesting efforts to apply this technology to the developing world (Hat tip: Giulio Quaggiotto). Kiwanja.net, a non-profit, has developed a program called FrontlineSMS that allows NGOs to communicate with their field workers through text messaging. As Witkin explains:

...the [NGO] administrator can compose a message once in FrontlineSMS and send it simultaneously to hundreds of volunteers. The program has been used by NGOs in over forty countries for a wide range of activities including blood donor recruitment, assisting human rights and conservation workers, election monitoring, and coordinating healthcare workers. 

Qat and the law of supply and demand

The Wall Street Journal had an article today on a little-known narcotic plant called Qat. It is popular in Yemen, Ethiopia, and a few other places, but most authorities don't look too kindly on the use of the plant. Qat causes a mild narcotic euphoria - think way too many espressos. Erowid, a directory of information about psychoactive substances, describes the experience of chewing the leaves of Qat like this:

The experience of khat chewing is often compared to other stimulants, similar to a strong dose of caffeine or a low dose of cocaine. Commonly reported effects include an increase in energy and alertness, increased physical endurance, mild euphoria, increased talkativeness, and cheerful mood. Physiological effects include increased heart rate, blood pressure, and wakefulness.

Are remittances good for growth? It depends...

I've just run across two papers examining the impact of remittances on growth, and they both point to a similar conclusion. The first, entitled Remittances and Growth in Latin America, concludes:

Another interesting result reported in this study is that the economic impact of remittances is higher in the upper income group than in the lower income group...The differential impact of remittances might be due to the fact that most of the remittances are spent on consumption in lower income countries, while the households in the upper income countries have more opportunities to invest them profitably.

A second paper, entitled Remittances and Financial Development: Substitutes or Complement in Economic Growth, came to this conclusion: