PSD Blog - The World Bank Group

Weekend Reading

Zimbabwe's inflation ranks as the second worst in history. Who's first?

Cool graph on the commitment to development of specific countries. Sweden comes on top.

The two Koreas.

Rural to urban migration in China has reached 1.5 million people per month.

Happy Halloween.

Technical announcement

The comments section is down. We have sent a note to the powers that be, and it should be remedied soon.

Apologies.

The Obstacle to Renewable Energy (hint: it isn't about costs)

Columbia University's Geoffrey Heal asks, "can renewable energy save the world?". The answer is dependent on infrastructure and technology, rather than cost:

Where does this leave us with renewables as a solution to the problem of climate change? We can replace some fossil fuel power with renewable power without a major cost increase, but we cannot hope to replace a major fraction of our fossil power with intermittent power sources such as wind and solar – unless we can develop storage technologies. Being able to store power and smooth the output of intermittent power sources would greatly enhance the attractions of renewable power.

The bottom line is that neither costs nor capital requirement will prevent us from decarbonising the electricity supply. The real obstacle to doing this largely with renewables is our current inability to store power, and as long as we cannot store power we will need to use non-renewable sources like nuclear and coal with carbon capture and storage.

Probably a good place to invest some stimulus money.

Easterly discovers the power law of international trade

Not too long ago, Bill Easterly and Justin Lin squared off at an event at the World Bank over the wisdom of industrial policy in developing countries. While I am sympathetic to Bill's position, judging by the mood of the crowd in the room, I would have to call the debate a tie.

Bill has returned for round two with a new working paper that formalizes some of the arguments he made during that debate. In the Power of Exports, the New York University Professor (and now avid and entertaining Twitterer) points out that tiny Fiji dominates the market for exports to the U.S. in the category of "Women's, girl's suits, of cotton, not knit." More generally, the market for exports tends to be dominated in each country by a few big hits (and what's more, to a particular importing country), whether women's cotton suits or "ceramic bathroom kitchen sanitary items not porcelain." Mathematically, this is described by a power law, where the likelihood of observing a particular value decreases exponentially with the size of that value.

PSD Blog Welcomes Doing Business!

  

The World Bank's Doing Business blog has migrated to the PSD blogoshere. Dahlia Khalifa, senior member of the Doing Business team explains the transition:

As we continue to experiment with new ways of communicating the key messages of Doing Business, we have decided to consolidate our efforts and combine with the World Bank Group's Private Sector Development blog. You'll be able to find new content from the Doing Business team under a new "Doing Business" category on the Private Sector Development. We hope to see you over there, and look forward to your hearing your thoughts through the comments function!

Next week, Crisis Talk will be joining us. Stay tuned.

The day you’ll be able to stumble upon development funds

Quite literally…

Imagine walking around the streets of DC with your mobile phone in hand. You "point" to, say, a building or a bridge and an application on the phone allows you to detect whether the project is a beneficiary of some of the $787 billion allocated by the US Government American Recovery and Reinvestment Act. The amount of money spent for the building and the name of the beneficiary are also displayed. Public spending could not get more transparent – and tangible – than this. Science fiction? Not anymore, thanks to the augmented reality mash-up just released by the ever inspiring folks at Sunlightlabs (hat tip: David Osimo).

 

Sometimes simple really is best

Editor's Note: Alan Johnson is a Senior Private Sector Advisor in the World Bank's Investment Climate Advisory Services Group

I’m always interested in situations where tools that are aimed at developing countries are applied to their high income counterparts. A recent post in the New York Times’ small business blog provides an excellent example. The author, Scott Shane, refers to the 2008 World Bank Group Entrepreneurship Survey, which gathers internationally comparable data on business creation, and applies it to the United States.

The results of the survey show that, after accounting for differences in per capita income, countries with easier and less expensive procedures for registering new businesses have higher rates of new business creation. This conclusion is reached by examining the relationship between the number of new business registrations (entry rate density) and the “ease of starting a business” indicator in the Doing Business report.

Resources 101

The World Bank's East Asia blog links to a fantastic graphic of the world's resources by country. There is a clear correlation between size and supply: the United States, Canada, Russia, China and Brazil dominate the list. In many categories, such as soy, uranium, rice, natural gas, cotton, and corn, over half of the world's supply is controlled by three countries or fewer.

Another interesting observation is that Brazil has almost 20 percent of the world's water resources (roughly on par with Saudi Arabia's share of oil reserves). Perhaps another reason to study Portuguese? 

Informal Sector Comparison: Manufacturing vs Services

I have been comparing the differences between manufacturing and services firms in the informal or unregistered sector. There is a rich literature on how and why these firms differ, but it is based on firms in the formal or registered sector. It’s a moot point whether differences between manufacturing and service firms in the formal sector also hold for the informal sector. For example, differences in scale economies between service and manufacturing firms are known to be important for the formal sector, but this is not immediately obvious when comparing these firms in the informal sector.

The Market for Aid 2.0: Collaborative markets

A couple of years ago, former PSD blogger Tim Harford and co-author Michael Klein argued for more market-like mechanisms in the aid industry in The Market for Aid. A new working paper by Owen Barder (Beyond Planning: Markets & Networks for Better Aid) picks up where Tim and Michael left off. Owen argues that aid agencies are stuck between a rock (donor countries) and a hard place (recipients and recipient country governments), in which the interests of donors and recipients don't fully align. Better planning alone won't make this problem go away. 

Owen offers up an alternative, something he calls a collaborative market. The concept draws on some of the ideas in The Market for Aid, but goes a step further:

A considered combination of market mechanisms, networked collaboration, and collective regulation would be more likely to lead to significant improvements [in the aid system]. A “collaborative market” for aid might include unbundling funding from aid management to create more explicit markets; better information gathered from the intended beneficiaries of aid; decentralized decision-making; a sharp increase in transparency and accountability of donor agencies; the publication of more information about results; pricing externalities; and new regulatory arrangements to make markets work.