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121. Saving Ghana from Its Oil: The Case for Direct Cash Distribution

Author:
Todd Moss and Lauren Young
Publication Date:
10-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Ghana can be considered a relative success story in Africa. We cite six variables—peace and stability, democracy and governance, control of corruption, macroeconomic management, poverty reduction, and signs of an emerging social contract—to suggest the country's admirable political and economic progress. The expected arrival of sizeable oil revenues beginning in 2011–13, however, threatens to undermine that progress. In fact, numerous studies have linked natural resources to negative outcomes such as conflict, authoritarianism, high corruption, economic instability, increased poverty, and the destruction of the social contract. The oil curse thus threatens the very outcomes that we consider signs of Ghana's success. This paper draws lessons from the experiences of Norway, Botswana, Alaska, Chad, and Nigeria to consider Ghana's policy options. One common characteristic of the successful models appears to be their ability to encourage an influential constituency with an interest in responsible resource management and the means to hold government accountable. The Alaska model in particular, which was designed explicitly to manufacture citizen oversight and contain oil-induced patronage, seems relevant to Ghana's current predicament. We propose a modified version of Alaska's dividend program. Direct cash distribution of oil revenues to citizens is a potentially powerful approach to protect and accelerate Ghana's political and economic gains, and a way to strengthen the country's social contract. We show why Ghana is an ideal country to take advantage of this option, and why the timing is fortuitous. We conclude by confronting some of the common objections to this approach and suggest that new technology such as biometric ID cards or private mobile phone networks could be utilized to implement the scheme.
Topic:
Corruption, Economics, Oil, and Poverty
Political Geography:
Africa and Ghana

122. Climate Change and the Future Impacts of Storm-Surge Disasters in Developing Countries

Author:
David Wheeler, Susmita Dasgupta, Benoit Laplante, and Siobhan Murray
Publication Date:
09-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
As the climate changes during the 21st century, larger cyclonic storm surges and growing populations may collide in disasters of unprecedented size. As conditions worsen, variations in coastal morphology will magnify the effects in some areas, while largely insulating others. In this paper, we explore the implications for 84 developing countries and 577 of their cyclone-vulnerable coastal cities with populations greater than 100,000. Combining the most recent scientific and demographic information, we estimate the future impact of climate change on storm surges that will strike coastal populations, economies and ecosystems. We focus on the distribution of heightened impacts, because we believe that greater knowledge of their probable variation will be useful for local and national planners, as well as international donors. Our results suggest gross inequality in the heightened impact of future disasters, with the most severe effects limited to a small number of countries and a small cluster of large cities.
Topic:
Climate Change, Development, and Economics

123. Aid, Dutch Disease, and Manufacturing Growth

Author:
Arvind Subramanian and Raghuram G. Rajan
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We examine the effects of aid on the growth of manufacturing, using a methodology that exploits the variation within countries and across manufacturing sectors, and corrects for possible reverse causality. We find that aid inflows have systematic adverse effects on a country\'s competitiveness, as reflected in the lower relative growth rate of exportable industries. We provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows. We conjecture that this may explain, in part, why it is hard to find robust evidence that foreign aid helps countries grow.
Topic:
Development, Economics, and Foreign Aid
Political Geography:
Washington

124. Will World Bank and IMF Lending Lead to HIPC IV? Debt Deja-Vu All Over Again

Author:
Benjamin Leo
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Four years ago, the G-7 pushed through an unprecedented initiative forcing the international financial institutions to cancel 100 percent of their outstanding debt claims on the world's poorest countries. Through the Multilateral Debt Relief Initiative (MDRI), these heavily indebted poor countries (HIPCs) stand to receive up to $60 billion in debt relief over time. Moreover, the World Bank, African Development Bank, and IMF shareholders approved a new debt sustainability framework to govern future lending decisions and prevent the need for yet another round of systemic debt relief. All parties emerged from these landmark agreements confident that the dragon of unsustainable debt finally had been slain. However, several unsettling trends raise serious questions about the finality of these actions. First, World Bank and AfDB lending disbursement volumes to these very same HIPC countries remain very high, and nearly the same as compared to pre-MDRI. Emergency IMF lending in response to the global economic crisis has compounded the situation. Second, IMF and World Bank growth projections for HIPCs remain overly rosy compared to actual and historical performance. Our new dataset of IMF growth projections suggests a structural optimism of at least one percentage point per year. Third, HIPCs continue to experience significant volatility in country performance measures that has a direct impact on their ability to carry debt sustainably. Taken together, these findings suggest that donor countries should re-examine the issue of debt sustainability in low-income countries and the system for determining the appropriate grant/loan mix. The upcoming IDA and AfDF replenishment negotiations present a timely opportunity to do so. Absent assertive and corrective action, the international community may be faced with the prospect of a HIPC IV agreement in the not too distant future.
Topic:
Development, Economics, and Foreign Aid
Political Geography:
Latin America

125. Is Newer Better? Penn World Table Revisions and Their Impact on Growth Estimates

Author:
Arvind Subramanian, Simon Johnson, William Larson, and Chris Papageorgiou
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper sheds light on two problems in the Penn World Table (PWT) GDP estimates. First, we show that these estimates vary substantially across different versions of the PWT despite being derived from very similar underlying data and using almost identical methodologies; that this variability is systematic; and that it is intrinsic to the methodology deployed by the PWT to estimate growth rates. Moreover, this variability matters for the cross-country growth literature. While growth studies that use low-frequency data remain robust to data revisions, studies that use annual data are less robust. Second, the PWT methodology leads to GDP estimates that are not valued at purchasing power parity (PPP) prices. This is surprising because the raison d'être of the PWT is to adjust national estimates of GDP by valuing output at common international (PPP) prices so that the resulting PPP-adjusted estimates of GDP are comparable across countries. We propose an approach to address these two problems of variability and valuation.
Topic:
Development, Economics, International Political Economy, International Trade and Finance, and International Affairs

126. Can Global De-Carbonization Inhibit Developing-Country Industrialization?

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. We depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports because of the potential growth consequences. Second, we decompose the impact of an agreement on emissions reductions into three components: the change in the price of carbon due to each country's emission cuts per se; the further change in this price due to emissions tradability; and the changes due to any international transfers (private and public). Manufacturing output and exports in low carbon intensity countries such as Brazil are not adversely affected. In contrast, in high carbon intensity countries, such as China and India, even a modest agreement depresses manufacturing output by 6-7 percent and manufacturing exports by 9-11 percent. The increase in the carbon price induced by emissions tradability hurts manufacturing output most while the Dutch disease effects of transfers hurt exports most. If the growth costs of these structural changes are judged to be substantial, the current policy consensus, which favors emissions tradability (on efficiency grounds) supplemented with financial transfers (on equity grounds), needs re-consideration.
Topic:
Climate Change, Development, and Economics
Political Geography:
China, India, and Brazil

127. Africa's Private Sector: What's Wrong with the Business Environment and What to Do About It

Author:
Vijaya Ramachandran, Manju Kedia Shah, and Alan Gelb
Publication Date:
03-2009
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Why has the private sector failed to thrive in much of sub-Saharan Africa? Drawing on a unique set of enterprise surveys, we identify inadequate infrastructure (especially unreliable electricity and poor quality roads) and burdensome regulations as the biggest obstacles to doing business. We find as well that the private sector in many countries is dominated by ethnic minorities, which inhibits competition and lowers demand for a better business environment. Solutions include investing in infrastructure, providing risk guarantees, and reforming regulations to lower the cost of doing business, as well as increasing access to education for would-be entrepreneurs.
Topic:
Development, Economics, Emerging Markets, Globalization, and International Trade and Finance
Political Geography:
Africa

128. Growing Pains in Latin America: An Economic Growth Framework as Applied to Brazil, Costa Rica, Colombia, Mexico, and Peru

Author:
Liliana Rojas-Suarez
Publication Date:
09-2009
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Before the global economic crisis began in 2008, all countries in Latin America, long known as the world's most economically and financially volatile region, had experienced five consecutive years of economic growth, a feat that had not been achieved since the 1970s. Yet despite this growth, Latin America's incomeper-capita gap relative to high-income countries and other emerging-market economies widened, and poverty remained stubbornly high. Latin America, in short, suffered from growing pains even when things were going reasonably well.
Topic:
Economics and Emerging Markets
Political Geography:
Brazil, Colombia, Latin America, Mexico, Costa Rica, and Peru

129. Income Per Natural: Measuring Development for People rather than Places - Working Paper 143

Author:
Michael Clemens and Lant Pritchett
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. We create a first estimate a new statistic: income per natural—the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50% higher than GDP per resident. For 1.1 billion people the difference exceeds 10%. We also show that poverty estimates are very different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural. This means that departing one's country of birth is today one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.
Topic:
Demographics, Development, Economics, Migration, Poverty, and Population
Political Geography:
United States and Albania

130. Intellectual Property and Public Health: An Overview of the Debate with a Focus on U.S. Policy

Author:
Carsten Fink
Publication Date:
06-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Over the past fifteen years, the United States and other developed countries have employed trade agreements to substantially strengthen the protection of intellectual property rights for pharmaceutical products in the developing world. The associated rules changes have already had an effect on pharmaceutical prices in developing countries, prompting conflicts between developing country governments seeking to promote drug access and Western pharmaceutical companies wishing to protect their exclusive rights. If anything, such conflicts are bound to intensify as more patent protected drugs enter pharmaceutical markets outside rich countries. This paper describes the global shift in intellectual property policies and employs economic analysis to evaluate its consequences for developing countries. It also puts forward several recommendations for policymakers in developing countries and in the United States, seeking to better reconcile innovation incentives and access needs.
Topic:
Economics, Health, and Science and Technology
Political Geography:
United States