This working paper by CGD research fellow David Roodman provides an original synthesis and exposition of the literature on a particular class of econometric techniques called "dynamic panel estimators," and presents the first implementation of some of these techniques in Stata, a statistical software package widely used in the research community. Stata is designed to encourage users to develop new commands for it, which other users can then use or even modify. In this paper, Roodman introduces two commands, abar and xtabond2, which is one of the most frequently downloaded user-written Stata commands in the world. Learn more
The aid business has long grappled with the trade-off between showing results and supporting a country's own institution-building. Donors want to be sure that their money makes a difference, and often quickly. But close monitoring raises costs and pushing for quick results leads to projects that bypass or even undermine domestic institutions that are crucial to development. In Payments for Progress: A Hands-Off Approach to Foreign Aid, Owen Barder, now director of Global Development Effectiveness at the United Kingdom Department for International Development, and CGD president Nancy Birdsall propose solving this problem by having donors pay for proven progress towards such agreed goals as additional children completing school and additional kilometers of roads built. How to achieve these goals would be left to the aid recipient government. They suggest this approach may be particularly useful in fragile states. Learn more
Microfinance is a widely celebrated strategy for helping poor people in the developing world. Leading microfinance institutions, including the Nobel Peace Prize-winning Grameen Bank, reach millions of clients. CGD research fellow David Roodman and Uzma Qureshi analyze why some microfinance institutions succeed in covering costs, earning returns, attracting capital, and scaling up. They conclude that financial imperatives can explain much about how microfinance products are designed, for example, the common emphasis on group lending to women. Thus the business acumen of microfinance innovators is underappreciated. But more rigorous study is needed to understand when and where these design choices help clients.
The colonial legacy of artificial borders is often seen as an important cause of problems for developing countries. In this paper CGD non-resident fellow William Easterly and his co-authors quantify this effect. They find that countries with straight borders that divide ethnic groups--lines on maps--tend to be less successful economically and politically than countries with less arbitrary borders.Learn more
Efforts to reform the IMF should be complemented by alternative approaches to doing what the Fund does, according to this new paper. The authors argue that competition would give developing countries more bargaining power and spur the IMF to improve. The paper focuses on the IMF's insurance role and argues for rapid restructuring and large cuts of the Fund's budget, with savings used to lower IMF interest rates.
Donors are considering committing in advance to purchase vaccines against diseases concentrated in low-income countries to spur research and development on vaccines for neglected diseases. How much money is needed? The authors of this paper find that a commitment comparable in size to the average sales of recently launched commercial products (adjusted for lower marketing costs)—about $3 billion per disease when products are at a relatively early stage in development —would be a highly cost-effective way to address major killers, such as malaria, tuberculosis and HIV/AIDS. The paper includes a link to a Web-based spread sheet for readers to conduct their own sensitivity analysis.Learn more
The UN Millennium Development Goals (MDGs) seek to ensure that all children complete primary school by 2015. But school completion rates don't tell us how much--or how little--the kids actually learn. This new working paper co-authored by CGD non-resident fellow Lant Pritchett shows that even in countries that meet the primary school completion goal, most students fall short of minimum competency in reading, writing and arithmetic. The answer, the authors argue, is a Millennium Learning Goal that measures how much students actually know. Learn more
Analysis of the U.S. budget reveals a chasm between Washington rhetoric about the potentially large threats arising from weak and failing states and the paucity of resources devoted to engaging with these troubled countries. The authors argue that the U.S. should think creatively about how and when to engage and should boost the $1.1 billion requested for these countries in the 2007 budget, regarding it as a form of venture capital, with high risks but potentially high rewards. Learn more
The migration of doctors and nurses from Africa to rich countries has raised fears of an African medical brain drain. Research on the issue has been hampered by lack of data. How many doctors and nurses have left Africa? Which countries did they leave? Where have they settled? To answer these questions, CGD researchers compiled the first dataset of cumulative bilateral net flows of African-born physicians and nurses to the nine most important destination countries. Learn more
This new working paper co-authored by CGD non-resident fellow William Easterly shows that measures of social cohesion--such as income inequality and ethnic fractionalization--are an important determinant of institutional quality, which is in turn an important determinant of economic policies and growth. On average, countries with less equal income distribution and larger numbers of ethnic and linguistic groups have weaker institutions, less-effective policies, and slower economic growth. Learn more
Do development and democracy lead to fewer massacres? By one estimate governments killed more than 170 million civilians in the 20th century – more than twice the number of soldiers killed in the century’s many wars. A new working paper co-authored by CGD non-resident fellow William Easterly using data from 1820 to 1998 finds that massacres are more likely at intermediate levels of income and less likely at very high levels of democracy. Episodes at the highest levels of democracy and income involve fewer victims. Learn more
Controversies about aid effectiveness go back decades. This new working paper by CGD senior fellow Steven Radelet provides an introduction and overview of the basic concepts, data and key debates about foreign aid. It explores the range of views on the relationship between foreign aid and economic growth and discusses the reform of foreign aid, including selectivity, country ownership, the participatory approach, harmonization and coordination, and results-based management.Learn more
It is sometimes claimed that big surges in aid might cause Dutch Disease--an appreciation of the real exchange rate which can slow the growth of a country's exports--and that aid increases might thereby harm a country's long-term growth prospects. In this new working paper CGD senior program associate Owen Barder argues that it is unlikely that a long-term, sustained and predictable increase in aid would, through the impact on the real exchange rate, do more harm than good. Learn more
Donor countries have pledged to increase aid by 60 percent over the next five years, and larger increases would be needed to meet the Millennium Development Goals. Can developing countries use more aid effectively? In this new working paper, CGD senior program associate Owen Barder argues that the obstacles to effective use of significantly increased aid can be overcome by a small number of practical improvements in how aid is provided and used. Learn More
When aid projects proliferate, donors often seek better oversight through smaller projects. While this may improve administration, it burdens recipient governments with reporting requirements and donor visits. CGD research fellow David Roodman suggests in a new working paper that big projects are best for countries that get more aid, have better governance, or have less revenue. He also shows how donors who care most about their own success tend to divide their aid portfolios into more, smaller projects to draw the recipient's resources away from other donors. This reduces development. Learn more
Will Debt Relief Make a Difference? Impact and Expectations of the Multilateral Debt Relief Initiative - Working Paper 88
The Multilateral Debt Relief Initiative (MDRI), the latest phase of debt reduction for poor countries from the World Bank, the IMF, and the African Development Bank, will come close to full debt reduction for at least 19 and perhaps as many as 40 countries. Debt relief proponents see it as a momentous leap in the battle against global poverty. CGD research fellow Todd Moss argues that actual gains in poverty reduction will be modest and slow.
In this new CGD working paper John Nellis takes stock of fifteen years of privatization in developing and post-communist countries. He finds that a surprisingly large amount of assets remain in state hands. And while technical assessments of the impact of privatization are often positive, public opinion tends to be highly critical. The paper ends with suggestions for creating incentives for privatization that better serve public needs.
With foreign investment in the U.S. increasingly in the spotlight, this working paper by William Cline explores the U.S. external deficit and the fact that the U.S. relies on foreign lending to finance its trade deficit. Cline emphasizes the dangers of a hard landing for the U.S., and why this would especially hurt developing countries that depend on an expanding U.S. economy and are vulnerable to spikes in interest rates. The paper is based on a chapter in Cline’s recent book, The U.S. as a Debtor Nation.