Archive for the ‘Development Economics’ Category

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.

official statistics and China’s GDP growth

Monday, April 24th, 2017

China’s official GDP estimates are distrusted by many, who think that the government is overstating the country’s true rate of economic growth. Columbia University’s Xavier Sala-i-Martin teamed up with two economists from the New York Fed (Hunter Clark and Maxim Pinkovskiy) to examine satellite data on variation over time of nighttime light emissions – a proxy for GDP growth. They find that the official statistics on average do not overstate China’s growth rate; in fact, in recent years they understate it.

For analysts of the Chinese economy, questions about the accuracy of the country’s official GDP data are a frequent source of angst, leading many to seek guidance from alternative indicators. These nonofficial gauges often suggest Beijing’s growth figures are exaggerated, but that conclusion is not supported by our analysis, which draws upon satellite measurements of the intensity of China’s nighttime light emissions—a good proxy for GDP growth that is presumably not subject to whatever measurement errors may affect the country’s official economic statistics. ….

The chart below presents the path of official Chinese GDP growth alongside our modified Li Keqiang Index (with the weights determined by the nighttime lights regression). We place a 95 percent confidence interval around our prediction.

Is Chinese Growth Overstated?

Hunter Clark, Maxim Pinkovskiy, and Xavier Sala-i-Martin, “Is Chinese Growth Overstated?“, Liberty Street Economics, 19 April 2017.

The authors’ full working paper on which this article is based, “China’s GDP Growth May be Understated” (NBER No. 23323, issued in April 2017), can be downloaded here.

rise of the robots

Sunday, April 23rd, 2017

Technological change in general is a good thing. After all, it means that we can produce more output with fewer hours of work, giving us more leisure and more goods to consume. Nonetheless, for some individuals, the change can be stressful. Workers may find themselves unemployed, or underemployed, unable to adjust to a changing job market. Leisure is not very pleasant when it comes in the form of involuntary unemployment with less income. (more…)

used clothing exports

Wednesday, February 1st, 2017

Used clothing is big business in low-income countries. The source of most of this merchandise is Europe and the United States. Here is an interesting interview with a man in the United States who exports used clothing. He learned the business from his father. (more…)

Trump’s style of industrial policy

Wednesday, December 7th, 2016

Donald Trump last week set a precedent with Carrier for direct deals with business firms, one that continues with Boeing and SoftBank. This style of governance, common in third-world countries, is new to the United States. The feedback from Trump’s political base has been positive, but many are not impressed.

Mr Trump’s intervention to stop Carrier, the air conditioner maker, moving more than 2,000 jobs to Mexico are politically popular even if the eventual deal means only 730 remain in Indiana. ….

“This was more of a mugging than a bribe,” Larry Summers, the former Treasury secretary, wrote of the deal Mr Trump negotiated with Carrier, whose parent company, United Technologies, has hinted that it felt under pressure to work with Mr Trump because of its vast defence contracts.

James Pethokoukis of the conservative American Enterprise Institute said it was still too early to establish “how much of this was just one-off behaviour and how much of this is going to become the modus operandi of the new administration”.

However, if it does become how a Trump administration works with business it would mark a fundamental shift for a US economy that has long thrived on the credo that the market decides and where businesses have been free of the sort of political pressure they might face in places such as China. “This is a novel political experiment and maybe it’s worth running,” Mr Pethokoukis said. “But I’d rather not run it with the largest economy in the world.”

Shawn Donnan, “Business wary of Twitter blasts from Trump’s bully pulpit“, Financial Times, 8 December 2016 (metered paywall).

Bourgeois Dignity

Sunday, July 31st, 2016

An unusual feature of Deirdre McCloskey’s book, Bourgeois Dignity, is the chapter headings which provide a concise summary of the argument of the book. Few books have impressed me so much.

The volume contains 450 pages of text, so each chapter is roughly 10 pages long. In addition there are 42 pages of endnotes, 41 pages of references and a useful 37-page index.

You can read the entire first chapter (pp. 1-9) here. Below is the complete table of contents.

1   The Modern World Was an Economic Tide, But Did Not Have Economic Causes.
2   Liberal Ideas Caused the Innovation
3   And a New Rhetoric Protected the Ideas.   
4   Many Other Plausible Stories Don’t Work Very Well.   
5   The Correct Story Praises “Capitalism.”   
6   Modern Growth Was a Factor of at Least Sixteen.    
7   Increasing Scope, Not Pot-of-Pleasure “Happiness,” Is What Mattered,   
8   And the Poor Won.    
9   Creative Destruction Can Be Justified Therefore on Utilitarian Grounds.   
10   British Economists Did Not Recognize the Tide,   
11   But the Figures Tell.   
12   Britain’s (and Europe’s) Lead Was an Episode,    
13   And Followers Could Leap over Stages.    
14   The Tide Didn’t Happen because of Thrift;    
15   Capital Fundamentalism Is Wrong.    
16   A Rise of Greed or of a Protestant Ethic Didn’t Happen;
17   “Endless” Accumulation Does Not Typify the Modern World.   
18   Nor Was the Cause Original Accumulation or a Sin of Expropriation.   
19   Nor Was It Accumulation of Human Capital, Until Lately.    
20   Transport or Other Domestic Reshufflings Didn’t Cause It,   
21   Nor Geography, nor Natural Resources;   
22   Not Even Coal.    
23   Foreign Trade Was Not the Cause, Though World Prices Were a Context,   
24   And the Logic of Trade-as-an-Engine Is Dubious,   
25   And Even the Dynamic Effects of Trade Were Small.    
26   The Effects on Europe of the Slave Trade and British Imperialism Were Smaller Still,
27   And Other Exploitations, External or Internal, Were Equally Profitless to Ordinary Europeans.   
28   It Was Not the Sheer Quickening of Commerce    
29   Nor the Struggle over the Spoils.   
30   Eugenic Materialism Doesn’t Work;
31   Neo-Darwinism Doesn’t Compute;    
32   And Inheritance Fades.
33   Institutions Cannot Be Viewed Merely as Incentive-Providing Constraints,   
34   And So the Better Institutions, Such as Those Alleged for 1689, Don’t Explain,
35   And Anyway the Entire Absence of Property Is Not Relevant to the Place or Period   
36   And the Chronology of Property and Incentives Has Been Mismeasured,    
37   And So the Routine of Max U Doesn’t Work.
38   The Cause Was Not Science,   
39   But Bourgeois Dignity and Liberty Entwined with the Enlightenment.   
40   It Was Not Allocation:   
41   It Was Words.   
42   Dignity and Liberty for Ordinary People, in Short, Were the Greatest Externalities,
43   And the Model Can Be Formalized.   
44   Opposing the Bourgeoisie Hurts the Poor,    
45   And the Bourgeois Era Warrants Therefore Not Political or Environmental Pessimism   
46   But an Amiable, if Guarded, Optimism.   

Deirdre N. McCloskey, Bourgeois Dignity: Why Economics Can’t Explain the Modern World (University of Chicago Press, 2010), pp. vii-ix.