In this CGD Brief, Todd Moss and Vijaya Ramachandran analyze the survey results of 300-400 manufacturing firms in Kenya, Tanzania and Uganda. Their main finding? Foreign firms perform better than local firms in generating jobs, increasing the productivty of their workers, and in skills transfer.
Most studies of privatization look at what happens to companies. Reality Check, a new volume of case studies from Latin America, Asia, and the former Soviet Union, examines the impact on people. Surprise: privatization has often been a reasonably good thing, even for the poor.
Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development - Working Paper 65
Bill Easterly challenges a central rationale of the push for the 2015 Millennium Development Goals: the idea that poverty can be overcome with a big push in foreign aid and investment. Instead, change must come from the bottom up, he says.
Time to put to rest the stale debate over whether the World Bank should disburse grants or loans to the world’s poorest countries. It is critical that the Bank provide more of its funding as grants, but in a more rational manner than has been the case to date. A third Bank window should distribute grants – and grants only – to very poor countries, for example, with incomes below $500 per capita. Shifting to grants-only for the very poorest countries would ensure they never again find themselves with unpayable debt burdens, and would allow them to re-invest resources into their own economies rather than repay the Bank.
The British proposal to create an International Finance Facility in order to 'frontload' $50 billion in aid per year until 2015 has generated a lot of attention and will likely be a major topic at the G8 meeting this July. But the IFF has also been shrouded in confusion and misconceptions. This paper explains the IFF proposal and highlights some of the common misunderstandings surrounding it, including the mechanics of the scheme itself, the potential for a U.S. role, and the expectations of aid which underlie the IFF’s premise. The UK deserves plaudits for elevating global poverty on the international agenda and for seeking ways to better harness the power of private capital markets for development. But the IFF, as currently conceived, is an idea that merits more scrutiny and a healthy dose of skepticism.
Financial Regulations in Developing Countries: Can they Effectively Limit the Impact of Capital Account Volatility? - Working Paper 59
After more than a decade of financial sector liberalization, both of domestic markets and of international financial transactions (capital account liberalization), policymakers in many developing countries remain concerned about the effects that large and highly volatile capital flows have on their financial systems. However, in spite of the tremendous costs associated with the resolution of crises and signs of discontent among the population with the outcome of some reforms, to date there is no significant evidence indicating a reversal of the reform process. While one could advance a number of hypotheses explaining this "commitment to reforms," developing countries’ decisions and actions seem to indicate that policymakers perceive capital inflows as a necessary component to achieve growth and development.
Does Foreign Direct Investment Promote Development? gathers together the cutting edge of new research on FDI and host country economic performance and presents the most sophisticated critiques of current and past inquiries.
A Better Globalization: Legitimacy, Governance, and Reform by Kemal Dervis is a reformist manifesto that argues that gradual institutional change can produce beneficial results if it is driven by an ambitious long-term vision and by a determination to continually widen the limits of the possible.
Business Environment and Comparative Advantage in Africa: Evidence from the Investment Climate Data - Working Paper 56
This paper ties together the macroeconomic and microeconomic evidence on the competitiveness of African manufacturing sectors. The conceptual framework is based on the newer theories that see the evolution of comparative advantage as influenced by the business climate—a key public good—and by external economies between clusters of firms entering in related sectors. Macroeconomic data from purchasing power parity (PPP), though imprecisely measured, estimates confirms that Africa is high-cost relative to its levels of income and productivity. This finding is compared with firm-level evidence from surveys undertaken for Investment Climate Assessments in 2000-2004.
From Pushing Reforms to Pulling Reforms: The Role of Challenge Programs in Foreign Aid Policy - Working Paper Number 53
This paper considers what role pull instruments or challenge programs (such as the World Bank's Poverty Reduction Support Credits or the United States' Millennium Challenge Account) could play within the overall framework of foreign aid, asking how they could be designed to function as effective and efficient incentive instruments and how they could best complement other aid modalities.