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111. Civil War: A Review of Fifty Years of Research

Author:
Christopher Blattman and Edward Miguel
Publication Date:
03-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Most nations have experienced an internal armed conflict since 1960. The past decade has witnessed an explosion of research into the causes and consequences of civil wars, belatedly bringing the topic into the economics mainstream. This article critically reviews this interdisciplinary literature and charts productive paths forward. Formal theory has focused on a central puzzle: why do civil wars occur at all when, given the high costs of war, groups have every incentive to reach an agreement that avoids fighting? Explanations have focused on information asymmetries and the inability to sign binding contracts in the absence of the rule of law. Economic theory has made less progress, however, on the thornier (but equally important) problems of why armed groups form and cohere, and why individuals decide to fight. Likewise, the actual behavior of armed organizations and their leaders is poorly understood. On the empirical side, a vast cross-country econometric literature has aimed to identify the causes of civil war. While most work is plagued by econometric identification problems, low per capita incomes, slow economic growth and geographic conditions favoring insurgency are the factors most robustly linked to civil war. We argue that micro-level analysis and data are needed to truly decipher war's causes, and understand the recruitment, organization, and conduct of armed groups. Recent advances in this area are highlighted. Finally, turning to the economic legacies of war, we frame the literature in terms of neoclassical economic growth theory. Emerging stylized facts include the ability of some economies to experience rapid macroeconomic recoveries, while certain human capital impacts appear more persistent. Yet econometric identification has not been adequately addressed, and there is little consensus on the most effective policies to avert conflicts or promote postwar recovery. The evidence is weakest where it is arguably most important: in understanding civil wars' effects on institutions, technology, and social norms.
Topic:
Economics, Peace Studies, Political Economy, and War

112. Heckle and Chide: Results of a Randomized Road Safety Intervention in Kenya

Author:
James Habyarimana and William Jack
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In economies with weak enforcement of traffic regulations, drivers who adopt excessively risky behavior impose externalities on other vehicles, and on their own passengers. In light of the difficulties of correcting inter-vehicle externalities associated with weak third-party enforcement, this paper evaluates an intervention that aims instead to correct the intra-vehicle externality between a driver and his passengers, who face a collective action problem when deciding whether to exert social pressure on the driver if their safety is compromised. We report the results of a field experiment aimed at solving this collective action problem, which empowers passengers to take action. Evocative messages encouraging passengers to speak up were placed inside a random sample of over 1,000 long-distance Kenyan minibuses, or matatus, serving both as a focal point for, and to reduce the cost of, passenger action. Independent insurance claims data were collected for the treatment group and a control group before and after the intervention. Our results indicate that insurance claims fell by a half to two-thirds, from an annual rate of about 10 percent without the intervention, and that claims involving injury or death fell by at least 50 percent. Results of a driver survey eight months into the intervention suggest passenger heckling was a contributing factor to the improvement in safety.
Topic:
Development, Economics, Political Economy, and Third World
Political Geography:
Kenya and Africa

113. Blunt Instruments: On Establishing the Causes of Economic Growth

Author:
Michael Clemens and Samuel Bazzi
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Despite intense concern that many instrumental variables used in growth regressions may be weak, invalid, or both, top journals continue to publish studies of economic growth based on problematic instruments. Doing so risks pushing the entire literature closer to irrelevance. We illustrate hidden problems with identification in recent prominently published and widely cited growth studies using their original data. We urge researchers to take three steps to overcome the shortcomings: grounding research in somewhat more generalized theoretical models, deploying the latest methods to test sensitivity to violations of the exclusion restriction, and opening the “black box” of the Generalized Method of Moments (GMM) with supportive evidence of instrument strength.
Topic:
Development, Economics, and Political Economy

114. The Microeconomic Determinants of Emigration and Return Migration and Return Migration of the Best and Brightest: Evidence from the Pacific

Author:
John Gibson and David McKenzie
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
A unique survey which tracks worldwide the best and brightest academic performers from three Pacific countries is used to assess the extent of emigration and return migration among the very highly skilled, and to analyze, at the microeconomic level, the determinants of these migration choices. Although we estimate that the income gains from migration are very large, not everyone migrates and many return. Within this group of highly skilled individuals the emigration decision is found to be most strongly associated with preference variables such as risk aversion, patience, and choice of subjects in secondary school, and not strongly linked to either liquidity constraints or to the gain in income to be had from migrating. Likewise, the decision to return is strongly linked to family and lifestyle reasons, rather than to the income opportunities in different countries. Overall the data show a relatively limited role for income maximization in distinguishing migration propensities among the very highly skilled, and a need to pay more attention to other components of the utility maximization decision.
Topic:
Economics, Migration, Political Economy, and Immigration
Political Geography:
Australia/Pacific

115. The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence

Author:
David Roodman and Jonathan Morduch
Publication Date:
06-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The most-noted studies on the impact of microcredit on households are based on a survey fielded in Bangladesh in the 1990s. Contradictions among them have produced lasting controversy and confusion. Pitt and Khandker (PK, 1998) apply a quasi-experimental design to 1991–92 data; they conclude that microcredit raises household consumption, especially when lent to women. Khandker (2005) applies panel methods using a 1999 resurvey; he concurs and extrapolates to conclude that microcredit helps the extremely poor even more than the moderately poor. But using simpler estimators than PK, Morduch (1999) finds no impact on the level of consumption in the 1991–92 data, even as he questions PK's identifying assumptions. He does find evidence that microcredit reduces consumption volatility. Partly because of the sophistication of PK's Maximum Likelihood estimator, the conflicting results were never directly confronted and reconciled. We end the impasse. A replication exercise shows that all these studies' evidence for impact is weak. As for PK's headline results, we obtain opposite signs. But we do not conclude that lending to women does harm. Rather, all three studies appear to fail in expunging endogeneity. We conclude that for non-experimental methods to retain a place in the program evaluator's portfolio, the quality of the claimed natural experiments must be high and demonstrated.
Topic:
Development, Economics, Foreign Aid, and Foreign Direct Investment
Political Geography:
Bangladesh, South Asia, and Asia

116. To Formalize or Not to Formalize? Comparisons of Microenterprise Data from Southern and East Africa

Author:
Vijaya Ramachandran, Manju Kedia Shah, Alan Gelb, and Taye Mengistae
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Why do firms choose to locate in the informal sector? Researchers often argue that the high cost of regulation prevents informal firms from becoming formal and productive. Our results point to a more nuanced story.
Topic:
Development, Economics, Markets, and Labor Issues
Political Geography:
Africa

117. Pricing and Access: Lessons from Randomized Evaluations in Education and Health

Author:
Michael Kremer and Alaka Holla
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper surveys evidence from recent randomized evaluations in developing countries on the impact of price on access to health and education. The debate on user fees has been contentious, but until recently much of the evidence was anecdotal. Randomized evaluations across a variety of settings suggest prices have a large impact on take-up of education and health products and services. While the sign of this effect is consistent with standard theories of human capital investment, a more detailed examination of the data suggests that it may be important to go beyond these models. There is some evidence for peer effects, which implies that for some goods the aggregate response to price will exceed the individual response. Time-inconsistent preferences could potentially help explain the apparently disproportionate effect of small short-run costs and benefits on decisions with long-run consequences.
Topic:
Development, Economics, Education, Health, Human Welfare, and Markets

118. Do Regulatory Reforms Stimulate Investment and Growth? Evidence from the Doing Business Data

Author:
Benjamin P. Eifert
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The role of regulatory barriers in inhibiting entrepreneurship, investment and employment creation is an old topic in economics. This study utilizes a five-year panel of data on regulations and procedures from the World Bank's Doing Business project, along with Arellano-Bond dynamic panel estimators, looking for evidence that regulatory reforms lead to higher aggregate investment rates (roughly, factor demand) or GDP growth conditional on investment rates (roughly, factor productivity). It looks both at individual regulatory indicators and more aggregate measures of the incidence of reforms, finding some evidence of positive impacts of regulatory reforms in countries which are relatively poor (conditional on governance) and relatively well-governed (conditional on income). Relatively poor and relatively well-governed countries grow about 0.4 and 0.2 percentage points faster in the year immediately following one or more reforms, respectively. In both subsets of countries, investment rates accelerate by about 0.6 percentage points in the subsequent year.
Topic:
Development, Economics, Markets, Poverty, and Third World

119. Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper documents an unusual and possibly significant phenomenon: the export of skills, embodied in goods, services or capital from poorer to richer countries. We first present a set of stylized facts. Using a measure which combines the sophistication of a country's exports with the average income level of destination countries, we show that the performance of a number of developing countries, notably China, Mexico and South Africa, matches that of much more advanced countries, such as Japan, Spain and USA. Creating a new combined dataset on FDI (covering greenfield investment as well as mergers and acquisitions) we show that flows of FDI to OECD countries from developing countries like Brazil, India, Malaysia and South Africa as a share of their GDP, are as large as flows from countries like Japan, Korea and the US. Then, taking the work of Hausmann et al (2007) as a point of departure, we suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, we find that a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether development benefits might derive not from deifying comparative advantage but from defying it.
Topic:
Development, Economics, International Trade and Finance, and Foreign Direct Investment
Political Geography:
United States, Japan, Malaysia, India, South Africa, Brazil, Spain, and Korea

120. The Illusion of Equality: The Educational Consequences of Blinding Weak States, For Example

Author:
Lant Pritchett and Martina Viarengo
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Does the government control of school systems facilitate equality in school quality? There is a trade-off. On the one hand, government direct control of schools, typically through a large scale hierarchical organization, could produce equalization across schools by providing uniformity in inputs, standards, and teacher qualifications that localized individually managed schools could not achieve. But there is a tendency for large scale formal bureaucracies to “see” less and less of localized reality and hence to manage on the basis of a few simple, objective, and easily administratively verified characteristics (e.g. resources per student, formal teacher qualifications). Whether centralized or localized control produces more equality depends therefore not only on what “could” happen in principle but what does happen in practice. When government implementation capacity is weak, centralized control could lead to only the illusion of equality: in which central control of education with weak internal or external accountability actually allows for much greater inequalities across schools than entirely “uncontrolled” local schools. Data from Pakistan, using results from the LEAPS study, and from two states of India show much larger variance in school quality (adjusted for student characteristics) among the government schools—because of very poor public schools which continue in operation. We use the PISA data to estimate school specific learning achievement (in mathematics, science, and reading) net of individual student and school average background characteristics and compare public and private schools for 34 countries. For these countries there is, on average, exactly the same inequality in adjusted learning achievement across the private schools as across the public schools. But while inequality is the same on average, in some countries, such as Denmark, there was much more equality within the public sector while in others, such as Mexico, there was much more inequality among the public schools. Among the 18 non-OECD participating PISA countries the standard deviation across schools in adjusted quality was, on average, 36 percent higher in government than in private schools. In cases with weak states the proximate cause of high inequality again was that the public sector distribution of performance had a long left tail—schools with extremely poor performance. Relying on blinded weak states for top-down control of educational systems can be lose-lose relative to localized systems relying on bottom-up control—producing worse average performance and higher inequality.
Topic:
Economics, Education, Government, Political Economy, and Social Stratification
Political Geography:
Pakistan and India