Growth and Crisis - Building Capacity to Reduce Poverty

Fridays Academy: Corruption, Growth and Poverty

Ignacio — Fri, 22 May 2009 13:16:06 +0000

(From Raj Nallari and Indira Iyer's lecture notes)

The literature on corruption is large and growing. In this and upcoming Fridays Academy comments we will attempt to capture the essence of the arguments and provide some empirical evidence on the impact of corruption on growth and poverty reduction. Corruption, which includes bribery, rent-seeking, extortion, embezzlement, is perceived as a major problem facing many countries. Corruption has therefore been variously defined to mean ‘the misuse of public office for private gain.’ This does not mean that there is no corruption in the private sector because this is quite common in (private) financial firms. But, corruption is more severe in the public sector than in the private sector. One of the first known articles on corruption and its punishment is in Kautilya’s Arthasastra (dating back to 14 BC). Corruption is found to be closely inter-related with a country’s social norms, formal and informal rules and culture as well as legal environment in a country. No matter what, corruption connotes illegal or improper (moral) behavior and is treated as a ‘socially and culturally deviant behavior.’ From political science point of view, high level of corruption coincides with political instability and tends to reduce citizen’s trust and faith in institutions.

Measurement of Corruption

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 08 May 2009 15:46:13 +0000

Conclusion

Urbanization is increasing at a rapid pace. Between 2005 and 2030, the world’s urban population is expected to grow at an average annual rate of 1.78 per cent, almost twice the growth rate of the world’s total population. The proportion of people living in rural areas will shrink significantly after 2015. While increasing urbanization has led to greater per capita incomes and productivity, at the same time, it has led to increasing informal sector, greater urban poverty, increasing number of slums, scarcity of housing, spiraling urban real estate prices, and inadequate infrastructure facilities. Given this phenomenon of economic concentration in one area and spatial disparities elsewhere, the key issue is “should rural labor move to jobs or should jobs move to rural areas?” Finance and labor do not automatically move towards poorer areas. Available evidence from across the world suggests that policy makers should strive to remove impediments to capital and labor flows and reinforce agglomeration economies. This can be done by policy makers encouraging labor movement by abolishing national minimum wages, cutting unemployment benefits and social benefits, and abolishing rent control to increase supply of housing. Similarly, improving business climate, increasing access to finance, including microfinance and availability of credit to small enterprises, and developing infrastructure services before firms move in, are likely to affect the decisions of firms in location of their productive activities. Strengthening the capacity of provincial and local governments in provision of essential services would be key to reduce economic concentration and spatial disparities.

World Development Indicators 2009

Ignacio — Thu, 07 May 2009 19:24:11 +0000

The World Development Indicators is the World Bank's premier annual compilation of data about development. The 2009 WDI includes more than 800 indicators in over 90 tables organized in 6 sections: World View, People, Environment, Economy, States and Markets, and Global Links.

WDI online database available for subscribers. Selected indicators can also be accessed for free with the quick query.

Moving Out of Poverty: Success from the Bottom Up (video presentation)

Ignacio — Tue, 05 May 2009 18:58:59 +0000

A while ago we mentioned the publication of the World Bank’s newest study on poverty: “Moving Out of Poverty: Success from the Bottom Up”.

A video of a recent presentation of this publication at the World Bank is now available on-line. Participants included, among others, Deepa Narayan, Project Director of the study, and Geoffrey Lamb, Managing Director of Public Policy at the Bill and Melinda Gates Foundation.

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 01 May 2009 14:57:53 +0000

Urban Land Management and Housing

It is not easy to control migration into a city. Therefore, cities become overcrowded with growing competition for space, mobility and resources. In the past 30 years the urban population in the Asian and Pacific region has increased by 560 million people (or 260 per cent) and in the next 30 years it is expected to increase by about 1,450 million people (or 250 per cent).

Blogs from the Earth Institute

Ignacio — Thu, 30 Apr 2009 15:59:26 +0000

Columbia University’s Earth Institute has created a site grouping four different blogs from its researchers and staff: State of the Planet, Climate and Energy, Water, and Millennium Villages.

Its Director, Jeffrey Sachs, is blogging there occasionally among many others. Worth visiting.

Map of Development Activities Worldwide

Ignacio — Tue, 28 Apr 2009 20:30:31 +0000

A while ago we wrote about the World Bank's Geo, a very useful Google map to browse WB's projects, news, statistics and public information centers by country.

The online directory AiDA (Accessible Information on Development Activities), has now put together a similar Google map with information about development activities. By clicking on a country we can see a summary of the development activities taking place there, classified according to Sector, Agency and Donor.

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 24 Apr 2009 15:29:15 +0000

Megacities and Urban Agglomeration

Dramatic decreases in costs of transport, communication and information technology should have reduced spatial disparities in economic activities and moved us to a ‘global village’. Yet, we find that in both industrial and developing countries, economic activities are concentrated in a few centers and there are regional disparities. For example, about 15 percent of world population live in temperate zones but produce 50 percent of world GDP. In United States, counties that take up 2 percent of the land area produce more than half of U.S. GDP. Similarly, poverty is concentrated in a few pockets in many countries. It was Krugman (1991) who deduced that agglomeration economies accrue at plant level and hence firms are located in a single area nearer to consumer demand in urban areas with large populations and minimal transport costs. In other words, location of economic activity matters and a tiny (initial) difference may soon lead to a concentration of economic activity around a center and ultimately to a formation of industry cluster in the same space. Agglomeration economies accrue at plant level, industry level or city and regional level.

The Financial Crisis and its Impact on Developing Countries

Ignacio — Wed, 22 Apr 2009 19:46:30 +0000

A new working paper by Stephany Griffith-Jones and José Antonio Ocampo, published by UNDP's International Poverty Centre, looks at the impact that the financial crisis is having on developing countries. The paper identifies three mechanisms that play a key role in spreading the consequences of the financial crisis to the developing world: remittances, capital flows and trade.

A one-pager also available from the IPC: How Does the Financial Crisis Affect Developing Countries?

More information on this topic at the World Bank's blog Crisis Talk.

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 17 Apr 2009 14:58:20 +0000

From Raj Nallari and Indira Iyer's lecture notes.

Urban Slums

As quality urban housing is costly, the increasing numbers of urban poor start living in slums where water and sanitation facilities are inadequate and living conditions are crowded and often unhealthy. The UN estimates that the number of people living in slums passed 1 billion in 2007 and could reach 1.39 billion in 2020, although there are large variations among regions. In Asia and the Pacific, two out of five urban dwellers live in slums, compared with three out of five in Africa.

In percentage terms, sub-Saharan Africa has about 72 percent of city dwellers living in slums. Asia has by far the highest number of city dwellers living in slums - the problem is worst in South Asia, where half of the urban population is composed of slum dwellers. The figure below illustrates the share of slum population in some Asian and Pacific countries. In 2001, Afghanistan had as much as 99 per cent of the urban population living in slums while Nepal and Bangladesh also had high proportions-92 and 85 per cent, respectively, although they have had some success in containing the problem since 1990.

Share of slum population in urban areas in selected Asian and Pacific countries, 1990 and 2001

Global Dialogue: Jagdish Bhagwati on Trade Policy Responses to the Global Economic Crisis.

Ignacio — Wed, 08 Apr 2009 16:21:12 +0000

Professor Jagdish Bhagwati participated in a Global Dialogue organized by the World Bank Institute, on the trade impact of the global economic crisis and trade policy responses. Other trade experts from Brazil, India, Malaysia, Poland, South Africa, Korea, Thailand and Sri Lanka joined this discussion, part of our ongoing series of Global Dialogues as a Response to the Global Economic Crisis.

Watch a video of the discussion.
Access the main page of the Global Dialogues series.

The Growth Blog on the Financial Crisis

Ignacio — Tue, 07 Apr 2009 16:29:05 +0000

Starting today, the Growth Commission Blog has launched an online discussion dedicated solely to issues related to the financial crisis, featuring opinions and commentary from experts around the world.

More discussion about the Financial Crisis and its impact on developing countries in our own series: Global Dialogues as a Response to the Global Economic Crisis.

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 03 Apr 2009 18:01:43 +0000

From Raj Nallari and Indira Iyer's lecture notes.

Income and Employment

Urban cities provide drawing power for rural migrants seeking more economic opportunities. Duranton (2008) points out that labor mobility is crucial to the growth process as it generates new ideas and opportunities. Labor mobility responds to wage differentials across different locations. A study by Prud’homme (1996) indicates that the GDP per capita in most cities in Asian developing countries are higher than their national incomes. As seen in the table below, the per capita income in cities was 3.66 times the per capita income of the country in Shanghai, and 1.13 times the national average in Seoul.

GDP of Urban Areas Compared with National GDP

Atlas of Global Development

Ignacio — Thu, 02 Apr 2009 20:16:21 +0000

The World Bank has recently published an updated second edition of the Atlas of Global Development.

You can also access it on-line, for free.

Ask the World Bank President

Ignacio — Mon, 30 Mar 2009 15:41:32 +0000

Tomorrow Tuesday Robert Zoellick will be speaking and taking questions about the financial crisis and its effects on the poor, ahead of the G20 summit in London. You can send your questions using the comments section of Reuters’ blog The Great Debate, or using the #askwb tag on Twitter.

Update
You can now watch the video of Robert Zoellick’s speech and access related information, including his answers to some of the blogger’s questions.

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 27 Mar 2009 20:32:05 +0000

From Raj Nallari and Indira Iyer's lecture notes.

Urbanization and Poverty

Currently an estimated one third of all urban residents are poor, which represents one quarter of the world’s total poor. Many of these are in small cities and towns where the incidence of poverty tends to be higher than in big cities. With continued urbanization, however, the numbers of the urban poor are predicted to rise and poverty will increasingly be more an urban phenomenon.

The incidence of urban poverty, or the share of poor as a proportion of the urban population, is highest for South Asia (35 percent) and Sub Saharan Africa (40 percent) as shown in the table below. Latin America and the Caribbean (LAC) and ECA have the greatest proportion of urban poor relative to the total poor, as a result of the high urbanization rates in these regions. The urban poor account for 66 percent and 50 percent of the total poor in these two regions. Overall, MENA has the lowest incidence and share of urban poverty. Urban poverty incidence is notably lower in East Asia and the Pacific (EAP), Eastern Europe and Central Asia (ECA) and Middle East and North Africa (MENA) than the other regions reflecting initial conditions.

Urban Poverty Estimates 2002

(using $1.08/day and $2.15/day poverty lines in 1993 PPP values)

Source: Ravallion, Chen and Sangraula. 2007.

Note: The headcount index represents the proportion of the urban population below the poverty line. The urban share of the poor represents the proportion of the urban poor of the total poor.

On mortgages (and II)

Raj — Thu, 26 Mar 2009 19:21:57 +0000

Transmission of crisis from home mortgages to US credit freeze and global oil-price hike

By early-2007, it became clear as housing prices began to decline, losses on sub-primate mortgages originated in 2003-2006 were rising more rapidly than the assumptions used and risk-model predictions. The deterioration in borrowing quality and other shortcomings mentioned yesterday gave little comfort to investors. The losses were hard to estimate, especially in an environment of house-price busts, and given that the sub-prime MBS had been re-packaged into complex CDOs and CDO-conduits were financed by commercial paper and various notes.

The bursting of the housing bubbles in the United States (as reflected in a surge in defaults and foreclosures since mid-2006 in US, resulted in a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt (US financial firms lost over $1 trillion by Dec 2008). This problem is especially severe because households, corporations, and government took on so much debt during the bubble years (that debt cumulated to over 400% of US GDP in U.S. and about 450% of UK GDP).

Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs. (US and European banks have been raising capital of about $400 billion from oil-producing countries and China but there is still a large gap as banks continue to write-down bad loans).

On mortgages (I)

Raj — Wed, 25 Mar 2009 15:41:12 +0000

Why did the U.S. Housing go bust in 2006-07?

The exact time when the home mortgage problems surfaced can now be pin-pointed as mid-2006 even though the housing problem was not fully acknowledged by the government and market players until almost summer of 2007. By mid-2006, there is now enough evidence that housing prices began to decrease significantly and default rates increased in some states such as California, Arizona etc.

There are essentially five theoretical models or frameworks that are used by economists to explain credit booms and busts. These are (1) changes in fundamentals over time; (2) irrational myopia as reflected in euphoric greed followed by fear or depressive panic; (3) implicit or explicit government subsidies and guarantees; (4) multiple equilibria or knife-edge problem; and (5) agency problems in assets management. Each of these frameworks is used to analyze the current housing problems, which triggered a U.S. financial meltdown and impacted a global economic crisis.

The ‘fundamentals’ framework emphasizes that credit cycles depend on evolving news and asymmetric information. Credit cycles reflect exogenous events which change rational expectations of future cash flows and risks among other things. There was no exogenous shock that triggered a credit crisis in 2007. There is no evidence that 9/11 attack on New York negatively impacted on credit for private investors and bankers continued to under-price risk and continue lending even larger amounts of money for mortgages during 2002-07.

Moving Out of Poverty: Success from the Bottom Up

Ignacio — Mon, 23 Mar 2009 15:35:09 +0000

The World Bank has launched its new study on Poverty “Moving Out of Poverty: Success from the Bottom Up”, which continues the work started with the excellent “Voices of the Poor”, published in 2000.

This new study, based on data from 60,000 interviews in 15 countries, looks at how and why some people manage to escape poverty.

You can access the overview on-line, and order the book here.

Duncan Green has posted a nice summary in his blog, From Poverty to Power.

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 20 Mar 2009 16:36:58 +0000

From Raj Nallari and Indira Iyer's lecture notes.

Urbanization and Growth

The world urban population is expected to nearly double by 2050, increasing from 3.3 billion in 2007 to 6.4 billion in 2050. By mid-century the world urban population will likely be the same size as the world’s total population in 2004. Virtually all of the world’s population growth will be absorbed by the urban areas of the less developed regions, whose population is projected to increase from 2.4 billion in 2007 to 5.3 billion in 2050. The urban population of the more developed regions is projected to increase modestly, from 0.9 billion in 2007 to 1.1 billion in 2050.

The urban growth rate of less developed regions reached a high at 3.0 per cent per year in 1995-2000 compared to 0.5 per cent in more developed regions. The urban growth rate is estimated to be particularly rapid in the urban areas of less developed regions, averaging 2.4 per cent per year during 2000-2030.

Graduate Scholarship Program

Ignacio — Thu, 19 Mar 2009 16:19:46 +0000

If you have been admitted to a development-related master’s degree program, are looking for funding and are from a World Bank member country eligible to borrow, the Joint Japan/World Bank Graduate Scholarship Program might interest you.

Only a few days left to apply. Next deadline is March 31, 2009.

Eligibility Criteria

Application Guidelines

If you have any questions, please contact the program directly.

Good luck.

DFID on the Future of International Development

Ignacio — Tue, 17 Mar 2009 20:28:55 +0000

UK's Department for International Development (DFID) recently published a background paper for their Conference on the Future of International Development: Eliminating World Poverty. It aims to provoke thought on the emerging challenges faced by developing countries and the rest of the world, and sets out a series of questions to address the priority issues.

In their website, DFID has also opened a consultation website where the public can participate in the debate on how to eliminate world poverty. The results will be included in a new paper to be published this summer. An interesting way of giving voice to the public opinion.

Development Podcasts

Ignacio — Mon, 16 Mar 2009 21:04:43 +0000

I find podcasts an interesting addition to Development blogs. We have already mentioned here the Development Drums, and the World Bank has its own series.

Any others out there?

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 13 Mar 2009 15:40:26 +0000

Based on Raj Nallari and Indira Iyer's lecture notes.

Trends in Urbanization (II)

The process of rapid urbanization started first in today’s more developed regions. In 1920, just under 30 per cent of their population was urban and by 1950, more than half of their population was living in urban areas. In 2007, high levels of urbanization, surpassing 80 per cent, characterized Australia, New Zealand and Northern America. Among the less developed regions, Latin America and the Caribbean has an exceptionally high level of urbanization (78 per cent in 2007), higher than that of Europe. Africa and Asia, in contrast, remain mostly rural, with 38 per cent and 41 per cent, respectively, of their populations living in urban areas. Over the coming decades, the level of urbanization is expected to increase in all major areas of the developing world, with Africa and Asia urbanizing more rapidly than the rest. Nevertheless, by mid-century, Africa and Asia are still expected to have lowest level of urbanization in comparison to other regions of the world.

Region Wise Levels of Urbanization, 2007

New Estimates of Global Poverty: Video

Ignacio — Thu, 12 Mar 2009 19:23:00 +0000

We already blogged about the World Bank's Updated Poverty Estimates and the reactions they brought.

You can now watch a video of a recent discussion on this topic, at the World Bank.

More Development Blogs: Climate Change, Governance, Microfinance

Ignacio — Wed, 11 Mar 2009 15:36:12 +0000

The authors of the World Bank's upcoming World Development Report 2010 are hosting the blog Development in a Changing Climate, "a forum to get broad-based input on fundamental questions relating to climate change and development".

Daniel Kaufmann, who led the work on Governance at the World Bank Institute and now is a Senior Scholar at the Brookings Institution "writes about some ideas, findings, current events and initiatives on Governance, Corruption and Capture, around the world" in his blog The Kaufmann Governance Post

David Roodman from the Center for Global Development is writing a Microfinance Open Book Blog where he "posts and seeks feedback on draft chapters, burning questions, and useful sources".

Paul Collier is blogging

Ignacio — Tue, 10 Mar 2009 15:40:59 +0000

Paul Collier will blog in the recently created Bottom Billion Blog which will be "bringing together the latest news, opinions and case studies from across Africa and other countries of the Bottom Billion". We look forward to this interesting addition to the blogosphere.

Listen to Paul discussing his books The Bottom Billion and Wars, Guns and Votes at Development Drums.

Update: you can know watch a video of the presentation of his latest book at the World Bank, a few days ago.

(Hat tip to Chris Blattman)

Fridays Academy: Urbanization and Growth

Ignacio — Fri, 06 Mar 2009 16:21:10 +0000

During this and upcoming Fridays we will be looking at the relationship between urbanization and growth. These postings are based on a text by Raj Nallari and Indira Iyer.

Urbanization and Growth

The common elements that underscored successful growth and development strategies in a number of countries which were on a high and sustained growth path elements included the maturation and deepening of the market institutions, effective macroeconomic policy management, high levels of savings and investment, openness to trade and financial flows (and adoption of technology), and fast-growing urban areas. During the next few weeks we will analyze one of these elements, the urbanization process, and discuss its contribution to growth and poverty alleviation as well as lay out the major emerging issues in the urbanization process of developing countries.

Trends in Urbanization

Brain Drain from Small Countries and its Growth Implications

Ignacio — Thu, 05 Mar 2009 22:44:16 +0000

A new Policy Research Working Paper published by the World Bank's Development Research Group, by Frédéric Docquier and Maurice Schiff: Measuring Skilled Migration Rates: The Case of Small States

Recent changes in information and communication technologies have contributed to a dramatic increase in the degree of integration and interdependency of countries, markets, and people. Against this background, one aspect of particular concern for small states is the international movement of people. This paper focuses on this particularly important aspect of globalization, with emphasis on the movement of skilled people and its relationship with country size. In addition to overall skilled migration, it provides evidence that controls for migration age in order to distinguish between those educated in the home country and those educated abroad. The authors discuss the growth implications of the brain drain from small countries and policies that may help control it.

More information on International Migration and Development at the World Bank.

ECLAC's Statistics on Latin America and the Caribbean

Ignacio — Wed, 04 Mar 2009 23:10:38 +0000

The Economic Commission for Latin America and the Caribbean (ECLAC) has recently publish the 2008 edition of its Statistical Yearbook, which contains social, economic and environmental data from the countries of Latin America and the Caribbean, including a section on Poverty.

Available in English and Spanish, on-line and also as a free download (2.78 MB)