PSD Blog - World Bank Group

Not satisfied with your college? Just call the secret police...

Apparently, degree mills - unaccredited universities - are a national security concern in Nigeria. The authorities mean business:

[The National Council on Education] is partnered with the Department of State Services—Nigeria's secret service—in locating, arresting, and prosecuting operators of unapproved universities and satellite campuses.

Questioning randomized evaluations

Randomized evaluations seem to be all the rage for figuring out whether to charge for bednets or the value of consumer credit. But some economists have started to ask questions. Chris Blattman raises the question of opportunity cost:

Randomized trials are expensive and time-consuming, and it's worth specifying under what circumstances (if any) they ought to be absorb the time and energy of the world's best and brightest development economists.

Meanwhile, Evelyn Stark over at CGAP has similar concerns. While randomized experiments may provide useful information, they can be expensive and time-consuming: "Expense - cited as equal to the cost of the microfinance intervention being tested." In some circumstances, simple monitoring and evaluation without randomization might be enough, even if it leaves us with less certainty about the outcomes. Perhaps it's time to develop more formal cost-benefit guidelines for randomized evaluations?    

Department of creative solutions

Having trouble flipping that property you bought before the subprime crisis hit? Perhaps you just need a more creative approach. You could try raffling it off, like this apparently unsellable 'eco-house' in the UK (Hat tip: Adam Smith Institute). Or if you're in the market to buy, you might consider paying for a £25 ticket for a chance to win the house. It's  "illuminated with a Rako wireless mood lighting system." Lovely.

Cooperation in anti-corruption initiatives

When the U.S. passed a law in 1977 called the Foreign Corrupt Practices Act, many American companies were not happy. The act made it punishable for American companies to bribe foreign officials. In contrast, many European countries allowed their companies to write off these payments when paying taxes. Rightly or wrongly, American companies complained that this would put them at an unfair disadvantage when competing abroad.

None of that really mattered, though, because few resources were ever put into enforcing the Foreign Corrupt Practices Act. It wasn't until many European countries changed their tune with the 1997 passage of the OECD Anti-Bribery Convention that an international anti-corruption regime became credible. And today the Wall Street Journal reports that the many OECD countries have gotten serious about dealing with corruption. The U.S. federal government was investigating over 80 companies last year, up from three in 2002. U.S. firms have been made to pay large fines in connection with bribery in Nigeria and Kazakhstan. The key, though, is that it is not the U.S. alone that is prosecuting bribery. Siemens AG was fined some 201 million euros for slush funds used for bribes. Perhaps now the developed world's calls for greater transparency will sound a little less hypocritical.

Dani Rodrik on camels and economic growth

Dani Rodrik returns to the blogging fray after a summer hiatus and treats us to a post on...camels! To be fair, he is actually quoting from an essay by Ricardo Hausmann on growth diagnostics. Here is part of the quote from the Hausmann essay:

Suppose you were asking: what is the binding constraint to animals thriving in the Sahara desert? This is not unlike the question of what limits economic growth in a country. However, in the Sahara, it is instructive to note that of those few animals that do thrive in that environment, a very large proportion are camels and a very small proportion are hippopotamus. The fact that the animals most intensive in the use of water, hippopotamus, are scarce while the animals least intensive in the use of water, camels, are thriving suggests that the supply of water may be a binding constraint to the spread of animals in the Sahara.

Trust through technology

The most recent Economist has a piece on mobile phones in the developing world - The meek shall inherit the earth - that hits on a lot of topics discussed on the PSD blog (Hat tip: Giulio Quaggiotto). It talks up the potential value of mobile phones in the developing world while warning about some of the technological barriers that still face mobile technologies: "walled gardens", overlapping efforts, sustainability, etc. The thing that amazes me, though, and that seems to get missed in much of the media coverage, is the extent to which trust plays a role in the use of these technologies, particularly m-banking. Here's the Economist's description of m-banking:

Aid vs. corruption

Esther Duflo has an interesting take on the appropriateness of aid that may fall into corrupt hands on the Managing Globalization blog:

But how much money leaks is not the relevant measure of whether a program should be undertaken. What is relevant is how useful each dollar [of] aid is. Usefulness is the combination of how much money actually reaches its intended beneficiary, and how useful the program is for the beneficiary. So if an intervention is extremely beneficial (which it may be for populations that have absolutely nothing), it may still be worthwhile undertaking it in a very corrupt and poor country even if we think that some of it will be lost along the way. This was my rationale for deciding, for example, to donate money to Myanmar after the floods of last spring, despite the real risk of misappropriation. Of course, this has to be balanced against the risk of inadvertently helping to keep someone in power because the leakage provides funds that help him maintain his base or pay for his army.

Doing Business 2009 - Five years of reforms

Doing Business 2009 is here! The sixth in the World Bank Group's annual series on business regulations, DB 2009 allows us to take a look at five years of reforms since DB 2004. But before I get to that, let me hit the highlights of DB 2009:

• This year's top reformer is...drum roll please...Azerbaijan! Azerbaijan improved on 7 out of 10 of the indicators tracked by DB and moved up 64 slots in the overall rankings.
• Two regions - Eastern Europe and Central Asia and Sub-Saharan Africa - accounted for 7 of the top 10 reformers: Azerbaijan, Albania, Kyrgyz Republic, Belarus, Senegal, Burkina Faso, and Botswana. The other top 10 were Columbia, Egypt, and Dominican Republic.
• Once again, Singapore tops the rankings, followed by New Zealand, the United States, and Hong Kong, China. 

Google as development agency

Google just released its own browser, Chrome, to compete with Internet Explorer. Daniel Altman on the International Herald Tribune blog argues that it may just turn out to be the developing world's browser. Now, Google has just announced it is supporting the development of a system of satellites to provide internet access to regions without fast fiber networks. Apparently, the bottom of the pyramid can be targeted from outerspace...

Investing in social capital markets

Bill Gates seems to have expressed the sentiment the best in his speech at Davos when he discussed the need for something he called creative capitalism. He argued for "an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities." And this sentiment came from one of the most successful capitalists of all time.

So it's no wonder that many have taken an interest in this topic, whatever name one might apply to it. From October 13 to 15, representatives from organizations as varied as Citigroup, Kiva, and the Skoll Foundation will be gathering in San Francisco at the Social Capital Markets conference. With the term social capital, the organizers have something in mind rather different from the more typical definition of the norms that helps societies function. Rather, the conference will focus on ways that financial capital can be directed to social purposes. 

Supply and demand of property rights

Famed Peruvian economist Hernando de Soto has argued forcefully for the protection of property rights as a key ingredient in economic development. His book The Mystery of Capital became a big hit with its argument that the poor had plenty of capital but that the lack of property rights meant it was unusable. De Soto hammered home this point again with the publication of Making the Law Work for Everyone. While there is general consensus on the importance of property rights, there is still a huge, unanswered question: How do we create them?

Capitalists of the world, unite!

Although Marx thought that workers would somehow spontaneously recognize their shared interests, Lenin realized it would take a little prodding by an avant-garde. It now looks like capitalists are running into the same problem.

The cost of carbon dioxide reduction

Emma Clarke, writing for ClimateChangeCorp.com, reports on the development of more environmentally friendly concrete in The truth about...cement. Don't ask me to explain the chemistry behind it - chemistry was my worst subject - but here are the basic facts. Cement accounts for some 5 percent of man-made carbon dioxide emissions. Traditional cements emits about .6 tonnes of carbon for every 1 tonne produced, and that's not counting emissions from the fuel burned to heat the kiln.

A new type of cement called geopolymer cement produces only about a third of the carbon of traditional cement. A company called Zeobond based in Australia has managed to produce it in small quantities at a price of only 10-15 percent more than traditional concrete. Assuming there are some economies of scale involved, I would guess that this price could be brought even lower. So it looks like the tradeoff in increased price vs. reduced pollution could be attractive. But there are naysayers.   

Reactions to the new poverty estimates

Last week the Development Research Group released new estimates of poverty around the world, and the press and the blogosphere have definitely taken notice. Here are some of the reactions.

First off, the Economist covered the new estimates in a piece called The bottom 1.4 billion. The author gives a pretty neutral review, although she comes to the defence of the numbers in one particular instance:

The discovery of another 400m poor people will not satisfy some of the bank’s critics, who think it still undercounts poverty. Its cost-of-living estimates are based on the prices faced by a “representative household”, whose consumption mirrors national spending. But the poor are not representative. In particular, they buy in smaller quantities—a cupful of rice, not a 10-kilogram bag; a single cigarette, not a packet. As a result, the “poor pay more”...[However,] even though they buy in smaller quantities, they save money by buying cut-price goods from cheaper outlets.

Consumer protection meets financial literacy

Yesterday saw an interesting day-long event that brought together the paired topics of financial literacy and consumer protection. (Many of the day's presentations are available here.) Although I only managed to attend the first couple of sessions, I caught a lot of interesting material.

After welcoming remarks, Martin Gruenberg, the Vice Chairman of the US Federal Deposit Insurance Corporation, started off with the keynote address. Gruenberg gave a play-by-play of the subprime meltdown in the US; I think it was good to start off on a note of humility. If the US has managed to muck it up this badly, then it might be good to approach the issue of consumer protection with a bit of caution.

Leapfrogging e-government

Looking back at this post on E-government - another chance to leapfrog?, I now realize I may have gotten it wrong. The real opportunity for some governments is not to develop more participatory and easy-to-use websites. Whatever solutions a government comes up with - even one as cool as Estonia's TOM that allows citizens to comment on laws and propose new legislation - will quickly become outdated by the development of new and better internet tools. Why not get the public sector out of the business of creating end-user internet solutions and instead get the private sector to do it?

At least, that's the proposal offered in a new paper in the Yale Journal of Law and Technology called Government Data and the Invisible Hand (Hat tip: Giulio Quaggiotto). While David Robinson et al. focus on e-government in the US, a lot of what they say could apply with some caveats to a lot of developing countries. Here's the heart of their argument: 

The price of organic food

The Guardian reports that organic food sales in the UK have started to tumble (Hat tip: African Agriculture). Sales have fallen nearly 20 percent in the last four-week period. Fortunately for developing countries, it looks like UK consumers were never very interested in buying organic produce from the developing world. Meanwhile, Juliette Jowit asks whether organic food was just a fad?

 

Dour outlook on Accra Agenda for Action

Homi Kharas has a less than optimistic outlook on the 3rd High Level Forum on Aid Effectiveness, scheduled from September 2 to 4: "[T]he Accra Agenda repeats the good intentions of the 2005 Paris Declaration on Aid Effectiveness, but offers few specifics for significant changes on the ground. There are not surprises." If Kharas had his way, participants in the forum would focus on three priorities:

• Raising official aid volumes
• Providing more development money and less assistance in kind
• Integrating civil society groups into development strategies

But Kharas predicts it will be business as usual on September 5 when the final agenda is announced. Meanwhile, the Better Aid Blog is doing a bit of liveblogging on the event. In the most recent post, Lucy Hayes does a back-of-the-envelope calculation and concludes the event costs in the ballpark of US$10 million.

Doing Business now on Facebook

 

This is just a quick note to let PSD blog readers know that Doing Business now has its own place in the world of Web 2.0. You can check out the Doing Business Facebook page here, complete with photos, videos, updates on new publications, and a number of other features. And if you want to get updates on Doing Business publications and events or just show your support for the publication, you can become a fan when you visit the page.

NB: You've got to have a profile to become a fan - if you don't, you can set one up here. Also, your personal information is NOT viewable by other fans of Doing Business unless they are already in your network as specified in your Facebook privacy settings. More on privacy issues here.   

Cross-posted on the Doing Business blog.

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.