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30 декабря 2013, 09:00

Outcomes, opportunity and development : why unequal opportunities and not outcomes hinder economic development

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This paper studies the relationship between inequality of opportunity and development outcomes in a cross-country setting. Scholars have long debated the impact of inequality on growth, development, and the quality of institutions in a society. The empirical relationships are however confounded by the notion that "inequality" can be seen as a composite of inequality arising from differences in effort and ability, which would tend to encourage competition and productivity, and inequality attributable to unequal opportunities, particularly in terms of access to basic goods and services, which might translate to wasted human potential and lower levels of development. The analysis in this paper applies a measure of educational opportunities that incorporates inequality between "types" or circumstance groups. Theories from economic history are used to instrument for this type of inequality in a large cross-country dataset. The results seem to confirm the hypothesis that this measure of inequality of opportunity is a better fit for structural inequality than the Gini index of income. The results suggest that inequality of endowments at the outset of history led to unequal educational opportunities, which in turn affected development outcomes such as institutional quality, infant mortality, and economic growth. The findings are robust to several checks on the instrumental variable specification.

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26 декабря 2013, 09:00

In the wake of the global crisis : evidence from a new quarterly database of export competitiveness

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Over the past two decades, international trade has become a privileged engine of growth for much of the developing world. With the global economy evolving continuously and rapidly, countries must pay close attention to their positioning on the map of global trade and production. Within this framework, countries must also become aware of how they fare relative to competitors and to their past export performance. Of particular importance is the extent to which their performance is driven by exporter own supply-side capacity as opposed to external or compositional factors, including product and geographical specialization and how these trends compare across countries. This paper describes a new initiative that uses quarterly data for 2005q1-2013q1 to compute comparable indicators of export performance for 228 countries and territories. The database, the Export Competitiveness Database, reveals interesting patterns in trade performance. Export performance, stripped of compositional effects, was strongest for countries from the Asia and Pacific region, on average. Moreover, such performance was almost entirely driven by exporting country specific factors, with changes reflecting growth in volume rather than price developments. All emerging and developing regions have, on average, improved export performance. The indicators in the database trace the legacy of supply-side capacity and the overall export performance of the double-dip recession in the euro area. An illustrative set of results suggests that the paper's measure of competitiveness correlates to a country's nominal and real effective exchange rate, factors that are commonly perceived as important determinants of competitiveness.

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26 декабря 2013, 09:00

Growth and competitiveness as factors of Eurozone external imbalances : evidence and policy implications

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The paper assesses the contribution of key factors associated with external imbalances in the Eurozone through the estimation of a panel-data vector autoregressive model over 1975-2011. Growth fluctuations, initially associated with demand booms triggered by unusually low interest rates and later with demand contractions resulting from the crisis and policy adjustments, have been key drivers of current account fluctuations. Changes in competitiveness, measured by real exchange rates or unit labor costs, have played a less important role. Demand shocks have contributed more to current account balance dynamics in the Eurozone periphery than in the core, whereas competitiveness has been a less prominent factor in the periphery but relatively more important in the core. Changes in competitiveness are positively associated with changes in growth. Preventing imbalances from building up in a context of growing financial integration and easy finance warrants enhanced mutual surveillance of fiscal imbalances, but also better regulation of credit markets to prevent excess leverage and concentration of lending in investments prone to speculative bubbles. Coordination of fiscal policy across the Eurozone would facilitate the management of external imbalances without placing an often unwarranted burden on fiscal tightening in countries with sound fiscal positions affected by credit booms. The policies of internal devaluation implemented in the periphery, aimed at promoting external competitiveness, may have had only limited effectiveness in restoring the external balance to equilibrium.

23 декабря 2013, 09:00

Estimating informal trade across Tunisia's land borders

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This paper uses mirror statistics and research in the field to estimate the magnitude of Tunisia's informal trade with Libya and Algeria. The aim is to assess the scale of this trade and to evaluate the amount lost in taxes and duties as a result as well as to assess the local impact in terms of income generation. The main findings show that within Tunisian trade as a whole, informal trade accounts for only a small share (5 percent of total imports). However, informal trade represents an important part of the Tunisia's bilateral trade with Libya and Algeria, accounting for more than half the official trade with Libya and more than total official trade with Algeria. The main reasons behind this large-scale informal trade are differences in the levels of subsidies on either side of the border as well as the varying tax regimes. Tackling informal trade is not simply a question of stepping up the number of controls and sanctions, because differences in prices lead to informal trade (and to an increase in corruption levels among border officials) even in cases where the sanctions are severe. As local populations depend on cross-border trade for income generation, they worry about local authorities taking action against cross-border trade. At the same time, customs officials are concerned about the risk of local protests if they strictly enforce the tariff regimes in place. This issue will become even more significant if fuel prices in Tunisia rise again as a result of a reduction in the levels of domestic subsidies.

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19 декабря 2013, 09:00

Intrinsic motivation, effort and the call to public service

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Pay schemes in the public sector aim to attract motivated, high-ability applicants. A nascent literature has found positive effects of higher pay on ability and no or slightly positive effects on motivation. This paper revisits this issue with a novel subject pool, students destined for the private and public sectors in Indonesia. The analysis uses dictator games and real effort tasks to examine wage effects on a measure of motivation that exactly matches the mission of the public sector task. The model and experimental design allow for precisely measuring (1) the distribution of ability over the effort task; (2) the distribution of motivational preferences for public sector missions; and (3) outside options when choosing to work for public sector missions. Three novel conclusions emerge. First, more pro-social workers do, in fact, exert higher effort in a pro-social task. Second, in contrast to previous research, motivated individuals are more likely to join the public sector when public sector pay is low than when it is high. Third, real public sector workers exhibit greater pro-sociality than private sector workers, even for entrants into the Indonesian Ministry of Finance.

18 декабря 2013, 09:00

Opportunity-sensitive poverty measurement

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This paper offers an axiomatic characterization of two classes of poverty measures that are sensitive to inequality of opportunity, one a strict subset of the other. The proposed indices are sensitive not only to income shortfalls from the poverty line, but also to differences in the opportunities faced by people with different predetermined characteristics, such as race or family background. Dominance conditions are established for each class of measures and a sub-family of scalar indices, based on a rank-dependent aggregation of type-specific poverty levels, is also introduced. In empirical analysis using household survey data from eighteen European countries in 2005, substantial differences in country rankings based on standard Foster-Greer-Thorbecke indices and on the new opportunity-sensitive indices are found. Cross-country differences in opportunity-sensitive poverty are decomposed into a level effect, a distribution effect, and a population composition effect.

16 декабря 2013, 09:00

Can subjective questions on economic welfare be trusted ? evidence for three developing countries

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While self-assessments of welfare have become popular for measuring poverty and estimating welfare effects, the methods can be deceptive given systematic heterogeneity in respondents' scales. Little is known about this problem. This study uses specially-designed surveys in three countries, Tajikistan, Guatemala, and Tanzania, to study scale heterogeneity. Respondents were asked to score stylized vignettes, as well as their own household. Diverse scales are in evidence, casting considerable doubt on the meaning of widely-used summary measures such as subjective poverty rates. Nonetheless, under the identifying assumptions of the study, only small biases are induced in the coefficients on widely-used regressors for subjective poverty and welfare.

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12 декабря 2013, 09:00

The method of randomization, economic policy, and reasoned intuition

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The method of randomization has been a major driver in the recent rise to prominence of empirical development economics. It has helped uncover patterns and facts that had earlier escaped attention. But it has also given rise to heated debate and controversy. This paper evaluates the method of randomization and concludes that, while the method of randomization is the gold standard for description, it is not able to demonstrate causality. Nor does it, in itself, lead to policy conclusions, as is often claimed by its advocates. To get to policy conclusions requires combining the findings of randomized experiments with human intuition, which, being founded in evolution, has innate strengths. Moreover, even non-randomized empirical methods combined with reasoned intuition can help in crafting development policy.

12 декабря 2013, 09:00

The benefits of solar home systems :an analysis from Bangladesh

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The Government of Bangladesh, with help from the World Bank and other donors, has provided aid to a local agency called Infrastructure Development Company Limited and its partner organizations to devise a credit scheme for marketing solar home system units and making these an affordable alternative to grid electricity for poor people in remote areas. This paper uses household survey data to examine the financing scheme behind the dissemination of these solar home systems, in particular the role of the subsidy; the factors that determine the adoption of the systems in rural Bangladesh; and the welfare impacts of such adoption. The paper finds that while the subsidy has been declining over time, the demand for solar home systems has seen phenomenal growth, mostly because of technological developments that have made the systems increasingly more affordable. Households with better physical and educational endowments are more likely to adopt solar home systems than poor households. The price of the system matters in household decision making -- a 10 percent decline in the price of the system increases the overall demand for a solar panel by 2 percent. As for the benefits, adoption of a solar home system improves children’s evening study time, lowers kerosene consumption, and provides health benefits for household members, in particular for women. It is also found to increase women's decision-making ability in certain household affairs. Finally, it is found to increase household consumption expenditure, although at a small scale.

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11 декабря 2013, 09:00

Clean-development investments : an incentive-compatible CGE modeling framework

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The Clean Development Mechanism established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissions-reduction projects in developing non-Annex I countries. Computable general equilibrium analysis of the Clean Development Mechanism's impacts so far mimics the Clean Development Mechanism as a sector emissions trading scheme, thereby overstating its potential to save climate change mitigation costs. This study develops a novel approach that represents the Clean Development Mechanism more realistically by compensating Clean Development Mechanism implementing sectors for additional abatement cost and by endogenizing Clean Development Mechanism credits as a function of investment. Compared with previous representations, the proposed approach is more consistent in its incentive structure and investment characteristics at the sector level. An empirical application of the new methodology demonstrates that the economy-wide cost savings from the Clean Development Mechanism tend to be lower than suggested by conventional modeling approaches while Clean Development Mechanism implementing sectors do not lose in output.

11 декабря 2013, 09:00

Global income distribution : from the fall of the Berlin Wall to the great recession

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The paper presents a newly compiled and improved database of national household surveys between 1988 and 2008. In 2008, the global Gini index is around 70.5 percent having declined by approximately 2 Gini points over this twenty year period. When it is adjusted for the likely under-reporting of top incomes in surveys by using the gap between national accounts consumption and survey means in combination with a Pareto-type imputation of the upper tail, the estimate is a much higher global Gini of almost 76 percent. With such an adjustment the downward trend in the Gini almost disappears. Tracking the evolution of individual country-deciles shows the underlying elements that drive the changes in the global distribution: China has graduated from the bottom ranks, modifying the overall shape of the global income distribution in the process and creating an important global "median" class that has transformed a twin-peaked 1988 global distribution into an almost single-peaked one now. The "winners" were country-deciles that in 1988 were around the median of the global income distribution, 90 percent of whom in terms of population are from Asia. The "losers" were the country-deciles that in 1988 were around the 85th percentile of the global income distribution, almost 90 percent of whom in terms of population are from mature economies.

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11 декабря 2013, 09:00

Macro prudential policies from a micro prudential angle

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The standard macro(prudential) models focus on externalities and treat all prudential instruments as alternative, but equivalent, forms of Pigouvian taxes. This paper explicitly models individual banks' risk choices and shows that different prudential instruments affect banks' risk-taking incentives differently. Thus, conflicts may arise between the micro and macro prudential stance.