Tag Archives: Economic development

Updates from Chicago Booth

How local productivity growth affects workers near and far
One city’s boom can be felt across a nation
Chicago Booth – When big cities experience an economic boom, you expect an upsurge in wages and growth in those areas. But there’s some nuance: according to Chicago Booth’s Richard Hornbeck and University of California at Berkeley’s Enrico Moretti, one area’s surge particularly benefits low-skilled workers locally—and high-skilled workers elsewhere.

Using total factor productivity (TFP) as a measure of local productivity growth, Hornbeck Amount and Moretti analyzed two decades of data from major US cities to quantify the direct effects on people living in booming cities and the indirect effects on people elsewhere. Allowing for trade-offs between salary and cost-of-living increases, as well as unequal distribution of benefits across different groups, the researchers find that low-skilled workers gained the most from local productivity growth.

But gains extended further afield: a boom in San Diego or Los Angeles, say, was also felt in other cities. And high-skilled workers gained more from productivity growth in other cities. more>

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To end poverty, think like a spy

By Paul M. Bisca – For anyone working to end poverty, fragile states call for the ultimate juggling act. Countries in conflict seldom control their territories, and even when most areas are at peace, others may still be engulfed by violence for decades to come.

The intensity of civil wars can ebb and flow, while forcibly displaced people cross borders in search of shelter. Politicians and warlords can shift alliances abruptly and neighboring states often interfere militarily to prop up local proteges.

When geopolitics is not at play, internal disputes over land, water, or other scarce resources can ignite fighting between local populations. To make sense of all these moving parts, even the most knowledgeable experts must look for new ways to comprehend the world.

What can be done?

To better manage the unknown, development professionals might want to take a leaf from the intelligence community book and draw inspiration from how spies try to predict the future. Reduced to its simplest terms, the CIA defines intelligence as “knowledge and foreknowledge of the world around us—the prelude to decisions by policymakers.”

Other definitions emphasize the collection, processing, integration, analysis, and interpretation of available information from closed and open sources.

Development practitioners are not spies, nor should they aspire to be. Further, the idea that project managers and economists should behave like spies is bound to raise eyebrows for professionals driven by the quest for sustainability and equity.

Yet, the methodology of intelligence is well-suited to paint in our minds the interplay of actions, information, and analysis needed to navigate the complex, uncertain, and downright dangerous environments where extreme poverty stubbornly persists.

This approach is not about acting like James Bond, but rather about thinking like him. more>

Economics as a moral tale

By John Rapley – Think of human development as a long journey.

At the beginning, we live at the mercy of nature. Dependent on its bounty, we pray for rains and freedom from natural disasters and plagues. At the end of the journey, nature lives at our mercy. We use science and technology to release new wealth and remake the planet.

Economists began to compose the narrative of this odyssey, from subjection to dominion, in the 1700s. Once it became apparent that Europe had broken with millennia of stasis to begin a long period of rising growth – the same through which we are still living – political economists abandoned philosophical reflection to draft roadmaps to development.

Two broad types emerged. One approach described the walk, the other the walker.

The first presumed that the context in which we made the journey – the natural environment, the institutions, the culture, the legal and political systems – determined the direction of the path. In this model, the government bore responsibility to build the path so that it could accommodate as many people as possible.

The second approach took a more individualist perspective. It presumed that the walker determined his or her own success in the journey. It concentrated on the moral, intellectual and physical attributes it believed an individual needed to advance. In this model, the task of the government was to sweep aside obstacles impeding the gifted few from embarking on their personal journeys – restraints that ranged from restrictions on labor mobility to usury laws. Thus liberated, gifted individuals would beat the path to prosperity.

By 1948, Western economies had emerged from crisis, beginning a decades-long period of rising growth and prosperity. Rather than pack up and go home, the development industry now turned its attention to a new frontier. With Europe’s overseas empires breaking up, dozens of new nation-states were coming into being, each of them eager to ‘catch up’ with its erstwhile colonial master. Amid this exciting atmosphere, the development industry could use its expertise to play a clear and prominent role, one captured in the subtitle to the then-Bible of development, Walt Rostow’s Stages of Economic Growth (1960) – ‘a non-communist manifesto’.

By now, statist economics was enshrined in theory and sanctified by practice. more>

Aside

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$4.6 Trillion Later, Foreign Aid Remains An Economic Somnolent

By Philip D.Harvey – The governments of the Western industrialized world have provided over $4.6 trillion (in constant 2007 dollars) to the world’s less-developed countries (LDCs) over the past 50 years, the equivalent of several Marshall Plans.

The focus of much foreign aid, especially in the past two decades, has been aid for the purpose of advancing economic development. This part hasn’t worked very well.

Foreign aid is best applied through private channels, for short-term emergencies, and/or for causes that are politically popular almost everywhere, like immunization. Propping up the finances of developing countries’ governments is likely to do more harm than good. more> http://tinyurl.com/8jvwgut