Archive for the ‘Development Economics’ Category

universal vs targeted transfers

Sunday, November 11th, 2018

Two Boston economists, Rema Hanna from Harvard and Benjamin A. Olken from MIT, have drafted a paper on basic incomes for the Journal of Economic Perspectives, a publication of the American Economic Association. They argue that, though a universal basic income (UBI) might be appropriate for wealthy countries, it is not appropriate for developing countries.

The paper is well-written, but fails to support their thesis. In fact, drawing on a phrase from William Shakespeare’s play Hamlet, they “hoist themselves with their own petard”.  A “petard” is a small bomb. Shakespeare, writing in the singular, referred to a case in which a bomb-maker is blown up (“hoisted”) with his own bomb. The phrase came to be used more generally, to indicate ironic reversal or poetic justice.

My point is simple: the text of the paper provides abundant evidence that universal incomes should be preferred to transfers that are limited to the poor. (more…)

air conditioning and global warming

Friday, August 24th, 2018

Air-conditioning has been a godsend for hot countries, and hot regions of otherwise temperate countries, but it comes with a huge environmental cost: the electricity needed to power these machines fuels global warming. A leader in this week’s Economist magazine argues that more needs to be done to make these machines more energy efficient, and that buildings, even entire cities, should be designed so that less air-conditioning is required. Here is a self-explanatory excerpt, with a link to the full article. (more…)

map of the day: China’s high-speed rail tracks

Tuesday, August 14th, 2018

This is amazing. In December 2009, China inaugurated its first long-distance high-speed rail service, moving trains 1,100km between the cities of Guangzhou and Wuhan in just three hours. Today, two-thirds of the world’s HSR tracks have been laid in China.

Critics point out that the rail construction has been financed with debt, and the interest costs of this debt exceeds the operating revenue of China Railway. I am not worried. It takes time to attract riders, and travel by electric rail is better for the environment than travel by air, provided electricity is not produced by burning coal or other fossil fuels.

For more information, see Tom Mitchell and Xinning Liu, “China’s high-speed rail and fears of fast track to debt“, Financial Times, 14 August 2018.


robots and jobs

Friday, July 6th, 2018

Tim Harford, the FT’s ‘undercover economist’ has written a superb column explaining why it makes no sense to tax ‘robots’. In part this is because robots do not exist, at least not yet. What threatens employment is automation of specific tasks, not whole jobs. Should we, then, tax automation, which drives increases in productivity? Mr Harford thinks that this is a bad idea, though he acknowledges “In a world of mass technological unemployment we are certainly going to need to tax something other than labour income alone”.

He illustrates his point brilliantly with the example of spreadsheets, an accounting process that a few decades ago was very labour-intensive. (more…)

China’s view of the world

Tuesday, May 1st, 2018

FT columnist Martin Wolf recently participated in an international conference convened by the Tsinghua University Academic Center for Chinese Economic Practice and Thinking. He describes it as “franker than any I have participated in during the 25 years I have been visiting China”, and lists seven propositions that the Chinese elite expressed to their foreign guests:

1. China needs strong central rule.
2. Western models are discredited.
3. China does not want to run the world.
4. China is under attack by the US.
5. US goals in the trade talks are incomprehensible.
6. China will survive these attacks.
7. This will be a testing year.

Martin simply describes these seven propositions, without criticism. I assume that he agrees with them, but perhaps he will express disagreement in a future column. Or, perhaps not. In the meantime, I pass along to you his description of proposition number two, which I found most interesting, and most disturbing for western states: (more…)

the rise of China

Wednesday, April 11th, 2018

FT columnist Martin Wolf has a long essay in today’s Financial Times on China as an emerging superpower and the potential for destructive clashes with the USA. It is balanced and well-written, exceeding even the high standards I have come to expect from Martin. (more…)

UBI in poor countries

Wednesday, June 7th, 2017

This is a great column. Mr Sandu does not mention it, but a universal pension is also good for poor countries (and wealthy countries as well). A universal pension, after all, is a universal basic income (UBI) limited to older folks and younger persons with disabilities.

[T]he debate in rich countries tends, naturally enough, to focus on the affordability and desirability of UBI in rich countries. But there is much to learn — for rich countries, too — about whether UBI would make sense in poorer ones. The answer is, perhaps paradoxically, that there is a good case for low-income countries to leapfrog the rich world in welfare policy.

John McArthur asks how many poor countries could afford to pay a UBI large enough to eradicate extreme poverty. The answer is stunning: 66 countries could do this at a cost of no more than 1 per cent of their national income. Doing so would lift 185m people out of extreme poverty, a quarter of the global total. A further 25 countries could do the same at a cost of between 1 and 5 five per cent of national income, eradicating extreme poverty for another 150m people. ….

UBI is the new frontier in welfare reform. At the moment it looks more likely to be conquered by the developing world, while countries known as advanced economies look on from behind.

Martin Sandbu, “Leapfrogging to universal basic income“, Free Lunch, Financial Times, 7 June 2017 (unfortunately gated by a paywall).

Mr Sandbu cites “How many countries could end extreme poverty tomorrow?“, 1 June 2017, a blog by John W. McArthur, senior fellow in the Global Economy and Development program at the Brookings Institution.

superstar firms and unemployed workers

Sunday, May 21st, 2017

Tim Harford, ‘undercover economist’ for the FT, has written a very interesting column on the unintended consequences of technological change. Increased productivity should be welcomed by all of us. The problem is that some of us suffer, while others gain. An equitable distribution of gains will not happen with markets alone. Government action is needed. (more…)

China’s aircraft industry

Friday, May 5th, 2017

China’s new Comac C919, a passenger plane designed to compete with the Boeing 737 and Airbus A320, is expected to roll off the production line in 2019.

In a hangar on a vast industrial complex near Shanghai’s Pudong airport, the Chinese-made aircraft that harbours the country’s hopes of rivalling the Boeing 737 and Airbus A320 is being prepared for its first test flight in May.

The Comac C919 is bounded by a huge Chinese flag and a banner bearing an exhortation from President Xi Jinping: “Focus and get down to work to make China’s first large aircraft fly into the skies.”  ….

Derek Levine, who wrote a book on China’s aviation ambitions, says that while the first flight will be a “huge accomplishment” in political terms, China will remain “15 years behind” unless it can develop its own engines and avionics, rather than relying on foreign suppliers.

Ben Bland, “China’s challenger to Airbus and Boeing set for skies at last“, Financial Times, 28 April 2017 (gated paywall).

For what’s its worth, my guess is that in a decade or two China will have mastered aircraft production, just as they have mastered high speed rail.

schooling in Myanmar (Burma)

Friday, April 28th, 2017

The World Bank gives low marks to schooling in Myanmar, a Southeast Asian country known also as Burma.

Myanmar has suffered from low school enrolment and completion rates (one third of 1.2 million students enrolled in grade 1 made it to grade 11, and only one third of those passed the school leaving exam); poor learning outcomes (9 percent of a third grade class in Yangon [the country’s largest city and former capital city] cannot read a single word); and inequalities in access and quality (net primary enrolment as low as 69 percent in poorer areas compared to 85 percent average nationally). [Emphasis added.]

World Bank, Myanmar: Public Expenditure Review, September 2015, p. 39.

The government of Myanmar provides a different, positive spin on schooling in the country.

Myanmar’s population is highly literate, with relatively high participation in primary schools, but there is a significant drop in participation in education in later school years. Over 95 percent of youth are literate. Only about 20 percent of children participate in pre-primary levels of education, but net attendance at primary school is roughly 90 percent. [p. 27]

Myanmar is piloting a new education stipend with the assistance of the World Bank that is conditioned on enrollment and attendance, and that uses community based targeting mechanisms to identify beneficiaries. [p.42]

Republic Of the Union Of Myanmar, Myanmar National Social Protection Strategic Plan, December 2014.

The focus in the government’s report is entirely on participation in schooling. There is no discussion of quality, nor any need to improve it.