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Microfinance, foreign aid, Commitment to Development Index, debt and debt relief
David Roodman, a former CGD senior fellow, worked at the Center from March 2002 to July 2013. His work at the Center focused on microfinance, debt relief, and aid effectiveness. His widely praised book Due Diligence confronts questions about the impacts of microfinance and how it should be supported. He wrote the book through a pathbreaking Microfinance Open Book Blog, where he shared questions, discoveries, and draft chapters.
Roodman was an architect and manager of the Commitment to Development Index since the project's inception in 2002. The Index ranks the world's richest countries based on their dedication to policies that benefit the 5 billion people living in poorer nations; it is widely recognized as the most comprehensive measure of rich-country policies towards the developing world.
Roodman wrote several papers questioning the capacity of common cross-country statistical techniques to shed light on what causes economic development. He co-authored a 2004 American Economic Review paper that challenged findings of World Bank research that aid works in a good policy environment. His non-technical Guide for the Perplexed builds on analysis of methodological problems and fragility in other studies. Among econometricians Roodman is best known for his computer programs that run in the statistical software package Stata; articles about them won him the inaugural Stata Journal editors' prize in 2012. Also in 2012, Roodman aged off the RePEc list of top young economists in the world, at number 6.
This blog post announces the launch of the Europe Beyond Aid initiative and presents a summary of the research and preliminary analysis in its first working paper.
Europeans more than pull their weight in aid to developing countries. Last year Europeans provided more than €60 billion ($80bn) in aid, more than two and a half times as much as the United States. European members account for just 40% of the national income of the Development Assistance Committee (DAC) but give more than 60% of the aid.
Jubilee essays by David Roodman and Ben Leo
Working group report: Preventing Odious Obligations
This year marks the 10th anniversary of 2000 Jubilee debt relief movement, in which religious organizations, development NGOs, and policymakers pressed successfully for deeper, faster debt relief for the world's poorest countries. What did the movement achieve? What pitfalls and policy opportunities lie ahead?
CGD fellow David Roodman discusses the beginning of the Jubilee movement. On Wednesday, September 29, 2010, CGD experts were joined by key actors in the movement to assess the legacy of the Jubilee. The event featured presentations by CGD Senior Fellow David Roodman and Todd Moss. The chair of CGD'd board, Ed Scott, and Minister Counselor Lars Petter Henie of Norway provided opening remarks. The morning and afternoon panels were moderated by CGD's Lawrence MacDonald, vice president of communications and policy outreach, and Nancy Birdsall, CGD's president.
The morning panel focused primarily on the evolution of the Jubilee movement and its growing impact in the last decade. CGD fellow David Roodman explains in his essay The Arc of Jubilee that the Jubilee 2000 movement, which called for the cancellation of the foreign debts of the poorest nations, reached its zenith in the late 1990s and 2000—and then, by design, shut down. In the space of a few years, it became one of the most successful international, non-governmental movements in history.
For complete videos, visit the CGD youtube channel.Jamie Drummond on why the Jubilee movement gained support from both secular and religious institutions.Roodman concludes that nongovernmental groups have shown that they can exercise power by educating members of the public and engaging them in the policymaking process. The success of Jubilee 2000 led directly to creation of new, high-profile NGOs in the 2000’s such as DATA and the ONE Campaign (now merged). It advanced an advocacy style that exploits the power of stars such as Bono; uses media old and new with savvy; strikes a strongly centrist stance (in the U.S. context, bipartisan); and subtly melds secular and religious appeals. In particular, Jubilee progeny unlocked more than $50 billion in U.S. government funding for global health in the 2000s, mainly for HIV/AIDS treatment in Africa. This aid flow dwarfs the new funds generated for debt relief. See David's full speech here, view the handout, or read his full paper here.
Masood Ahmed explains the importance of the process of engaging heavily indebted poor countries in the Jubilee movement.In transition between the morning and afternoon panels Masood Ahmed, director of the Middle East and Central Asia Department at the IMF, offered a first-hand perspective of how international financial institutions are approaching the issue of odious debt and what obstacles remain for the process of debt cancellation. Ahmed explained that in the World Bank there was always the sense that debt relief was a "crazy idea". In fact there was never any concern about where the money for debt relief would come from, but rather people within the World Bank were concerned that these efforts had short-term benefits and long-term consequences.
Speaking to these concerns, Todd Moss followed by arguing that the International Monetary Fund is partially at fault due to its proven systematic overestimates of growth for heavily indebted poor countries. Additionally, even as past debt was relieved, the sustainability of low-income countries' debt was eroded by new, even greater official lending—primarily by IFIs. Between 1989 and 2003, new nominal lending to HIPCs was twice as large as the amount of nominal debt relief provided. In the early 2000s, several donor governments, think tanks, and civil society organizations began to realize that the HIPC Initiative did not provide a lasting solution to the problem of unsustainable debt in poor countries.
Todd Moss outlines some of the crucial elements of the evolution of the Jubilee movement.However, despite sound academic support for debt relief, the reality of instituting any kind of debt cancellation policy for the heavily indebted poor countries still remains grounded in a quagmire of bureaucracy both on the scale of governments and international finance institutions. Some members of the afternoon panel raised doubts about whether there was any statistically significant evidence that debt relief was an effective tool for aid of the heavily indebted poor countries.
Clay Lowery discusses the difficulties of instituting policy changes in the face of governmental bureaucratic gridlock.The panel ultimately offered conflicting assessments of how to proceed with the future of the Jubilee movement. Panelist Seema Jayachandran posited that the status quo had to be changed in order to give poor countries better opportunities to avoid the burden of illegitimate lending. The idea of debt relief in itself can be a powerful tool in spurring economic growth for the HIPCs, but it is by no means a sweeping solution regarding the issue of odious debt.
Another approach, set forth in a recent CGD working group report, is to prevent odious debt from forming in the first place. The report, Preventing Odious Obligations: A New Tool for Protecting Citizens from Illegitimate Regimes, proposes an agreement that could declare that successor governments to a (named) illegitimate regime would not be bound by contracts that the illegitimate regime signs after the declaration. Some rogue investors might operate in defiance of the system, but this new approach would still help free successor governments from concerns about repudiating illegitimate contracts.
The argument about whether foreign aid "works" rages on. Recently, Paul Collier sought a practical middle path between William Easterly's development pessimism and Jeffrey Sach's development boosterism. How can smart people draw such contradictory conclusions from the same data? This new working paper by CGD research fellow David Roodman answers this question by describing consensus where it exists and identifying sources of controversy. Roodman concludes that, while aid has eradicated diseases, prevented famines, and done many other good things, given the limited and noisy data available, its effects on growth in particular probably cannot be detected.
Twenty-five years ago today, I walked into Building 1 of the Microsoft Corporation’s wooded campus in Redmond, WA, and reported for work as a programming intern. I had a pretty good time that summer. What I remember most is wondering whether I should buy a bit of stock in the company—and then spending all my earnings on long-distance calls to my new girlfriend.
In this working paper, CGD research fellow David Roodman describes the methodology of the foreign aid component of the 2012 edition of the Commitment to Development Index. The CDI ranks 22 of the world’s richest countries on their dedication to policies that benefit the 5.5 billion people living in poorer nations. Moving beyond standard comparisons of foreign aid volumes, the CDI quantifies a range of rich-country policies that affect poor people in developing countries