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December 22, 2015

The Role of Industrial Policy as a Development Tool: New Evidence from the Globalization of Trade-and-Investment

Emerging market countries that manage to diversify and upgrade their production and export base grow more rapidly and enjoy greater welfare gains than those that do not.  Foreign direct investment in manufacturing is concentrated in middle- and upper-skilled activities -- not lowest-skilled operations -- and thus offers many opportunities for structural transformation of the host economy.  But the challenge of using FDI to diversify and upgrade the local production and export base is fraught with market failures and tricky obstacles.  Contemporary debates about industrial policy as a development tool focus on how best to overcome these market failures and other difficulties.

August 20, 2013

Moving Beyond Mines and Mobiles: How Can IFC Add Value in Fragile States?

The International Finance Corporation wants to increase its development impact in fragile states. Currently, the IFC’s fragile-state portfolio mirrors that of overall foreign direct investment stocks in such countries: focused in extractive industries and mobile telephony. That suggests potentially limited value-added from the Corporation’s investments in terms of crowding in private capital. If the IFC is trying to increase its portfolio and development impact in fragile states, it should look for sectoral opportunities that share some of the features of mines and mobile investments but currently attract limited FDI.

October 10, 2007

The 2007 Commitment to Development Index: Components and Results

This CGD brief summarizes the results of the 2007 Commitment to Development Index (CDI), which ranks 21 of the world's richest countries on their dedication to policies that benefit the five billion people living in poorer nations. The Netherlands comes in first on the 2007 CDI on the strength of ample aid-giving, falling greenhouse gas emissions, and support for investment in developing countries. Close behind are three more big aid donors: Denmark, Sweden, and Norway.

Cover of A Better Globalization: Legitimacy, Governance, and Reform
March 1, 2005

A Better Globalization: Legitimacy, Governance, and Reform

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.

Kemal Dervis and Ceren Özer
February 5, 2005

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.

September 27, 2004

Beyond HIPC: Secure Sustainable Debt Relief for Poor Countries - Working Paper Number 46

In 1999, the United States and other major donor countries supported an historic expansion of the heavily indebted poor country (HIPC) debt relief initiative. Three years after the initiative came into existence, we are beginning to see the apparent impact that HIPC is having, particularly on recipient countries' ability and willingness to increase domestic spending on education and HIV/AIDS programs. Yet it has also become clear that the HIPC program is not providing a sufficient level of predictability or sustainability to allow debtor countries (and donors) to reap the larger benefits, particularly in terms of sustained growth and poverty reduction, originally envisioned. After reviewing some of the main critiques and proposals for change, we offer here a new way forward -- a proposal to deepen, widen, and most importantly insure debt relief to poor countries.

Brian Deese
February 27, 2003

New Data, New Doubts: Revisiting "Aid, Policies, and Growth" - Working Paper 26

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)

Ross Levine and David Roodman
December 20, 2002

World Bank Capital Neither Complements Nor Substitutes for Private Capital - Working Paper 20

What should the World Bank optimally do with the US$10 to $20 billion it can loan each year? Has it, in fact, done what is optimal? This study suggests a simple framework within which to measure the World Bank against an optimal international public financier for development. It goes on to argue that a careful treatment of the empirical evidence on Bank lending strongly contradicts optimal behavior under different assumptions. The evidence, in fact, rejects any notion that the Bank has substituted for private capital or that it has successfully catalyzed private development finance.

Michael A. Clemens
December 1, 2002

Private Sector Involvement in Financial Crisis Resolution: Definition, Measurement, and Implementation - Working Paper 18

Public policy on financial crises in emerging markets has implicitly been grounded in economic theory calling for lender-of-last-resort intervention when the country is solvent, and on theory recognizing that reputational damage is the quasi-collateral enabling lending to sovereigns with no physical collateral. The call for Private Sector Involvement — PSI — in the financing of crisis resolution has appropriately arisen from the desire for fairness as well as for successful outcomes. This paper identifies an array of PSI modalities and argues that in each crisis case the most voluntary type consistent with the circumstances should be chosen, to speed return to market access.

August 1, 2002

An Identity Crisis? Testing IMF Financial Programming - Working Paper 9

The IMF uses its well-known "financial programming" model to derive monetary and fiscal programs to achieve desired macroeconomic targets in countries undergoing crises or receiving debt relief. Financial programming is based on monetary, balance of payments, and fiscal accounting identities. This paper subjects the identity-based framework to a variety of tests. All of the identities contain large statistical discrepancies, which weakens the case for them as a "consistency check." In addition, the financial programming approach is flawed because it does not take into account the endogeneity of virtually all the variables in each macroeconomic identity, the instability of its simple behavioral assumptions, and the large statistical discrepancies in all the identities. Accounting identities do not a macro model make.