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1. Policy Decisions and Evidence Use among Civil Servants: A Group Decision Experiment in Pakistan

Author:
Laura Metzger, Theodore Svoronos, and Adnan Qadir Khan
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
In a lab-in-field experiment with elite civil servants in Pakistan, we investigate whether groups outperform individuals in a two-staged task which requires effective use of data and evidence. We also study how efficiently groups harness their members’ individual knowledge for problem-solving. We do not find a significant difference in individual (first stage) and group performance (second stage). Yet, groups could have significantly improved their performance during the second stage of the task, had they more efficiently collaborated to retrieve their members’ respective knowledge. Carefully interpreted in the setting of our experiment, our data suggests that diversity in individual knowledge may hamper effective use of data and evidence for decision- making in small groups of policymakers.
Topic:
Education, Public Policy, and Civil Servants
Political Geography:
Pakistan and South Asia

2. You Get What You Pay For: Sources and Consequences of the Public Sector Premium in Albania and Sri Lanka

Author:
Ricardo Hausmann, Ljubica Nedelkoska, and Sehar Noor
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
We study the factors behind the public sector premium in Albania and Sri Lanka, the group heterogeneity in the premium, the sources of public sector wage compression, and the impact of this compression on the way individuals self-select between the public and the private sector. Similar to other countries, the public sectors in Albania and Sri Lanka pay higher wages than the private sector, for all but the most valued employees. While half of the premium of Sri Lanka and two-thirds of it in Albania are explained by differences in the occupation-education-experience mix between the sectors, and the level of private sector informality, the unexplained part of the premium is significant enough to affect the preferences of working in the public sector for different groups. We show that the compressed distributions of public sector wages and benefits create incentives for positive sorting into the public sector among most employees, and negative sorting among the most productive ones.
Topic:
Employment, Human Capital, Public Sector, and Private Sector
Political Geography:
South Asia, Sri Lanka, and Albania

3. India’s Great Slowdown: What Happened? What’s the Way Out?

Author:
Arvind Subramanian and Josh Felman
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
We examine the pattern of growth in the 2010s. Standard explanations cannot account for the long slowdown, followed by a sharp collapse. Our explanation stresses both structural and cyclical factors, with finance as the distinctive, common element. In the immediate aftermath of the Global Financial Crisis (GFC), two key drivers of growth decelerated. Export growth slowed sharply as world trade stagnated, while investment fell victim to a homegrown Balance Sheet crisis, which came in two waves. The first wave—the Twin Balance Sheet crisis, encompassing banks and infrastructure companies—arrived when the infrastructure projects started during India’s investment boom of the mid-2000s began to go sour. The economy nonetheless continued to grow, despite temporary, adverse demonetization and GST shocks, propelled first by income gains from the large fall in international oil prices, then by government spending and a non-bank financial company (NBFC)-led credit boom. This credit boom financed unsustainable real estate inventory accumulation, inflating a bubble that finally burst in 2019. Consequently, consumption too has now sputtered, causing growth to collapse. As a result, India is now facing a Four Balance Sheet challenge—the original two sectors, plus NBFCs and real estate companies—and is trapped in an adverse interest-growth dynamic, in which risk aversion is leading to high interest rates, depressing growth, and generating more risk aversion. Standard remedies are unavailable: monetary policy is stymied by a broken transmission mechanism; large fiscal stimulus will only push up already-high interest rates, worsening the growth dynamic. The traditional structural reform agenda—land and labour market measures—are important for the medium run but will not address the current problems. Addressing the Four Balance Sheet problem decisively will be critical to durably reviving growth. Raising agricultural productivity is also high priority. And even before that, a Data Big Bang is needed to restore trust and enable better policy design.
Topic:
International Trade and Finance, Economy, Global Political Economy, Economic growth, and Global Financial Crisis
Political Geography:
South Asia and India

4. Validating India's GDP Growth Estimates

Author:
Arvind Subramanian
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
My recent research paper “India's GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications,” (hereafter “GDP paper”) and the associated op-ed in the Indian Express on June 11, 2019 have generated considerable debate. This is encouraging because serious argument and counter-argument are the basis for good policy-making. Since the issue itself is of great importance, the counter-arguments to my analysis warrant a considered response. That is the aim of this note, which is a complement to the original paper, addressing both the larger issues and some of the specific points that have been raised. The note is structured as follows. Section II describes my engagement with India’s GDP estimation when I was Chief Economic Adviser. Section III elaborates on the framework/approach underlying the GDP paper. Section IV makes explicit the key puzzle surrounding India’s growth estimates, and addresses the possible explanations for it. Section V explores the puzzle in greater detail. Section VI provides additional cross-country evidence on growth and price deflators, which support the findings of the original paper, namely that growth during 2011-16 was likely overestimated by a significant margin. Section VII addresses two broad objections to the main findings. Section VIII discusses some of the methodological critiques of the paper. Section IX offers some thoughts on the way forward.
Topic:
Economics, Political Economy, International Development, and Economic growth
Political Geography:
South Asia and India

5. Trust in State and Non-State Actors: Evidence from Dispute Resolution in Pakistan

Author:
Daron Acemoglu, Ali Cheema, Asim Ijaz Khwaja, and James A. Robinson
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Lack of trust in state institutions, often due to poor service provision, is a pervasive problem in many developing countries. It may also be one of the reasons citizens turn to non-state actors for services. This paper investigates whether information about improved public services can help build trust in state institutions and move people away from non-state actors. We focus on dispute resolution in rural Pakistan. We find that (truthful) information about reduced delays in state courts leads to citizens reporting higher likelihood of using them and to greater allocations to the state in two high-stakes lab-in-the-field games designed to measure belief in the effectiveness of state courts and willingness to contribute resources for others to access them. More interestingly, we find indirect negative effects on non-state actors in the same high-stakes settings. We show that the positive direct and negative indirect effects are both mediated by changes in beliefs about the effectiveness of these actors. Our preferred interpretation explains these behaviors as a response to improved beliefs about state actors which then motivate individuals to interact less with non-state actors and as a result downgrade their beliefs about them. We provide additional checks bolstering this interpretation and alleviating concerns about potential social experimenter effects or mechanical contrasts between the two actors. These results indicate that, despite distrust of the state in Pakistan, credible new information can change beliefs and behavior.
Topic:
Conflict Resolution, Non State Actors, Political and institutional effectiveness, State, and Legitimacy
Political Geography:
Pakistan and South Asia

6. India's GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications

Author:
Arvind Subramanian
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
India changed its data sources and methodology for estimating real gross domestic product (GDP) for the period since 2011-12. This paper shows that this change has led to a significant overestimation of growth. Official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7 percent. We estimate that actual growth may have been about 4.5 percent with a 95 percent confidence interval of 3.5 - 5.5 percent. The evidence, based on disaggregated data from India and cross-sectional/panel regressions, is robust. Lending further credence to the evidence, part of the overestimation can be related to a key methodological change, which affected the measurement of the formal manufacturing sector. These findings alter our understanding of India’s growth performance after the Global Financial Crisis, from spectacular to solid. Two important policy implications follow: the entire national income accounts estimation should be revisited, harnessing new opportunities created by the Goods and Services Tax to significantly improve it; and restoring growth should be the urgent priority for the new government.
Topic:
GDP, Global Political Economy, Economic growth, and Global Financial Crisis
Political Geography:
South Asia and India

7. Incentivising Pro-Labour Reforms

Author:
Alice Evans
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
This paper shows that countries may reduce labour repression if they perceive this as conducive to export growth. This paper traces what happened before, in the presence of, and then following the withdrawal of international economic incentives for pro-labour reforms in Vietnam and Bangladesh. The Government of Vietnam announced it would allow independent trade unions, in order to join the Trans-Pacific Partnership (TPP) and increase market access. Similarly, the Government of Bangladesh rescinded restrictions on unions, following global condemnation of Rana Plaza and fear of buyers leaving en masse. Both governments reduced labour repression to promote export growth. With high-level authorisation, Vietnamese and Bangladeshi activists and reformists became less fearful, and mobilised for substantive change. However, these economic incentives were short-lived: after Trump’s election, the USA withdrew from TPP; buyers continued to source from Bangladesh, and squeezed prices (without requiring labour reforms). Both governments then amped up labour repression - notwithstanding private regulation, economic upgrading, industry growth, and mass strikes.
Topic:
Economics, Labor Issues, Reform, Economic growth, and Trans-Pacific Partnership
Political Geography:
Bangladesh, South Asia, and Vietnam

8. Women and Work in India: Descriptive Evidence and a Review of Potential Policies

Author:
Erin K. Fletcher, Rohini Pande, and Charity Troyer Moore
Publication Date:
12-2017
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Sustained high economic growth since the early 1990s has brought significant change to the lives of Indian women, and yet female labor force participation has stagnated at under 30%, and recent labor surveys even suggest some decline since 2005. Using a nationally representative household survey, we lay out five descriptive facts about female labor force participation in India that help identify constraints to higher participation. First, there is significant demand for jobs by women currently not in the labor force. Second, willing female non-workers have difficulty matching to jobs. Third, obtaining vocational training is correlated with a higher likelihood of working among women. Fourth, women are more likely to be working in sectors where the gender wage gap and unexplained wage gap, commonly attributed to discrimination, is higher. Finally, female-friendly policies, including quotas, are correlated with higher female participation in some key sectors. Combining these facts with a review of the literature, we map out important areas for future investigation and highlight how policies such as employment quotas and government initiatives focused on skilling and manufacturing should be better investigated and leveraged to increase women’s economic activity.
Topic:
Gender Issues, Labor Issues, Women, Inequality, Economic growth, and Public Policy
Political Geography:
South Asia and India

9. Learning to Improve the Investment Climate for Economic Diversification: PDIA in Action in Sri Lanka

Author:
Matt Andrews, Duminda Ariyasinghe, Amara S. Beling, Peter Harrington, Tim McNaught, Fathima Nafla Niyas, Anisha Pooblan, Mahinda Ramanayake, H. Senavirathne, Upatissa Sirigampala, Renuka M. Weerakone, and W. A. F. Jayasiri Wijesooriya
Publication Date:
10-2017
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Many countries, like Sri Lanka, are trying to diversify their economies but often lack the capabilities to lead diversification programs. One of these capabilities relates to preparing the investment climate in the country. Many governments tackle this issue by trying to improve their scores on ‘Doing Business Indicators’ which measure performance on general factors affecting business globally (like how long it takes to open a business or pay taxes). Beyond these common indicators, however, investors face context specific challenges when working in countries like Sri Lanka that are not addressed in global indicators. Governments often lack the capabilities to identify and resolve such issues. This paper narrates a recent initiative to establish these capabilities in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). The paper will be of interest to those thinking about the challenges associated with creating a climate that is investor or business friendly and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation.
Topic:
Economy, Business, Global Political Economy, and State
Political Geography:
South Asia and Sri Lanka

10. Learning to Engage New Investors for Economic Diversification: PDIA in Action in Sri Lanka

Author:
Matt Andrews, Duminda Ariyasinghe, Krishantha Britto, Peter Harrington, Nelson Kumaratunga, M.K.D. Lawrance, Tim McNaught, Hemadree Naotunna, Ganga Palaketiya, Anisha Pooblan, Dilip Sanmarasinghe, and Prasanjith Wijayathilake
Publication Date:
10-2017
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Many countries, like Sri Lanka, are trying to diversify their economies but often lack the capabilities to lead diversification programs. One of these capabilities relates to engaging new investors—in new sectors—to bring their FDI and know-how to a new country and kick-start new sources of activity. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). It shows how an investment engagement approach can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about investor engagement challenges and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation in public contexts.
Topic:
Monetary Policy, Economies, Global Political Economy, and Investment
Political Geography:
South Asia and Sri Lanka