This paper re-examines the evidence linking poor growth during the era of import substituting industialization with trade restrictions.
Poverty reduction is now, and quite properly should remain, the primary objective of the World Bank. But, when the World Bank dreams of a world free of poverty—what should it be dreaming? I argue in this essay that the dream should be a bold one, that treats citizens of all nations equally in defining poverty, and that sets a high standard for what eliminating poverty will mean for human well-being.
This policy brief is a preview of the analysis and recommendations in Trade Policy and Global Poverty, by William R. Cline.
The book compiles a vast amount of unpublished and published material on existing CTE programs and their impact on poverty. Groundbreaking case studies and detailed evaluations of programs in Mexico, Brazil, Bangladesh, Nicaragua, Honduras, and Chile add up to an unusual and surprising success story for skeptics of development and foreign aid.
*REVISED Version May 2007
Recent literature contains many stories of how foreign aid affects economic growth: aid raises growth in countries with good policies, or in countries with difficult economic environments, or mainly outside the tropics, or on average with diminishing returns. The diversity of these results suggests that many are fragile. I test 7 important aid-growth papers for robustness. The 14 tests are minimally arbi-trary, deriving mainly from differences among the studies themselves. This approach investigates the importance of potentially arbitrary specification choices while minimizing arbitrariness in testing choices. All of the results appear fragile, especially to sample expansion.
This paper applies a new approach to the estimation of the impact of policy, both the levels and the changes, on wage differentials using a new high-quality data set on wage differentials by schooling level for 18 Latin American countries for the period 1977–1998. The results indicate that liberalizing policy changes overall have had a short-run disequalizing effect of expanding wage differentials, although this effect tends to fade away over time.
This brief assesses the impact of AGOA to date and recommends measures to improve its development potential.
This book tackles head on the tension between foreign policy and development goals that chronically afflicts U.S. foreign assistance; the danger of being dismissed as one more instance of the United States going it alone instead of buttressing international cooperation; and the risk of exacerbating confusion among the myriad overlapping U.S. policies, agencies, and programs targeted at developing nations, particularly USAID.
National economic policies' effects on growth were over-emphasized in the early literature on endogenous economic growth. Most of the early theoretical models of the new growth literature (and even their new neoclassical counterparts) predicted large policy effects, which was followed by empirical work showing large effects. A re-appraisal finds that the alleged association between growth and policies does not explain many stylized facts of the postwar era, depends on the extreme policy observations, that the association is not robust to different estimation methods (pooled vs. fixed effects vs. cross-section), does not show up as expected in event studies of trade openings and inflation stabilizations, and is driven out by institutional variables in levels regressions.
In this study, Steven Radelet examines the MCA's potential promise and possible pitfalls. He offers a rigorous analysis of the MCA’s central challenge: making foreign aid more effective in supporting economic growth and poverty reduction in the poor countries. He systematically explores what makes the MCA different and pinpoints the critical issues that will determine its success or failure.
At the United Nations Millennium Summit in 2000 the nations of the world committed to join forces to meet a set of measurable targets for reducing world poverty, disease, illiteracy and other indicators of human misery—all by the year 2015. These targets, later named the Millennium Development Goals, include seven measures of human development in poor countries. At the same summit, world leaders took on several qualitative targets applicable to rich countries, later collected in an eighth Goal. The key elements of the eighth Goal, pledge financial support and policy changes in trade, debt relief, and other areas to assist poor countries'domestic efforts to meet the first seven Goals. Combined, the eight Goals constitute a global compact between poor and rich to work today toward their mutual interests to secure a prosperous future.
The Burnside and Dollar (2000) finding that aid raises growth in a good policy environment has had an important influence on policy and academic debates. We conduct a data gathering exercise that updates their data from 1970-93 to 1970-97, as well as filling in missing data for the original period 1970-93. We find that the BD finding is not robust to the use of this additional data. (JEL F350, O230, O400)
CGD working paper 26, "New Data, New Doubts: Revisiting "Aid, Policies, and Growth" by CGD non-resident fellow William Easterly, research fellow David Roodman, and Ross Levine (also published as "Aid, Policies, and Growth: Comment" in the American Economic Review, June 2004), concludes that the Burnside and Dollar (2000) finding that aid raises growth in a good policy environment is not statistically robust. This dataset is a four-year panel covering 1966–97. It includes all the Burnside and Dollar data and Easterly, Levine and Roodman's expanded data set.
After a decade of economic reforms that dramatically altered the structure of economies in Latin America, making them more open and more competitive, and a decade of substantial increases in public spending on education, health and other social programs in virtually all countries, poverty and high inequality remain deeply entrenched. In this paper we ask the question whether some fundamentally different approach to what we call "social policy" in Latin America could make a difference — both in increasing growth and in directly reducing poverty. We propose a more explicitly "bootstraps"-style social policy, focused on enhancing productivity via better distribution of assets. We set out how this broader social policy could address the underlying causes and not just the symptoms of the region's unhappy combination of high poverty and inequality with low growth.
The US government's proposed $5 billion Millennium Challenge Account (MCA) could provide upwards of $250-$300m or more per year per country in new development assistance to a small number of poor countries judged to have relatively "good" policies and institutions. Could this assistance be too much of a good thing and strain the absorptive capacity of recipient countries to use the funds effectively? Empirical evidence from the past 40 years of development assistance suggests that in most potential MCA countries, the sheer quantity of MCA money is unlikely to overwhelm the ability of recipients to use it well, if the funds are delivered effectively.
In this paper I set out the economic logic for why good global economic governance matters for reducing poverty and inequality and argue that a step towards better global governance would be better representation of developing countries in global and regional financial institutions.