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Category: Development

Published June 15, 2012

The Relationship between Economic Growth and Foreign Aid

A new article by Michael Clemens et al. in the Economic Journal:

Recent research yields widely divergent estimates of the cross-country relationship between foreign aid receipts and economic growth. We re-analyse data from the three most influential published aid-growth studies, strictly conserving their regression specifications, with sensible assumptions about the timing of aid effects and without questionable instruments. All three research designs show that increases in aid have been followed on average by increases in investment and growth. The most plausible explanation is that aid causes some degree of growth in recipient countries, although the magnitude of this relationship is modest, varies greatly across recipients and diminishes at high levels of aid.

You can follow Michael on Twitter here.

 

Published May 22, 2012

Guest Post: Review of “Catching Up: What LDCs Can Do and What Others Can Help,” by Paul Collier

(Note: This is a guest post by Feyza Ileri, who was a student in my development seminar last fall. Feyza took a course titled “Current Issues in International Trade and Economic Development” in the Department of Economics with my colleague Ed Tower. This book review was one of her assignments for Ed’s course.)

Catching Up: What LDCs Can Do and What Others Can Help
Paul Collier, Published by Commonwealth Secretariat, February 2011
80 pages, $24.95

Paul Collier, professor of economics and director of the Centre for the Study of African Economies at Oxford, has written a number of engaging and provocative books on development. Catching Up is one such book. The book focuses on the least developed countries (LDCs) and suggests a number of development strategies for the governments of those countries.

Although the LDCs’ share of the world’s population is around 12 percent, they account for less than 2 per cent of the world’s GDP. Taking this into consideration, Collier presents a guide for decision makers who aim to make LDCs attain and sustain a significant rate of growth and catch up with the middle income developing countries.

The book indicates that for the 2000-2008 period, the LDCs achieved and a 4-percent increase on average in GDP per capita GDP, an 11-percent decrease in mortality. Despite these improvements, since other developing countries have grown faster, the income differential between the LDCs and other developing countries has widened and is still widening. Moreover, Collier believes that governments hold the authority and credibility to force change. He thus offers concrete recommendations for the governments of the LDCs.

One striking point in Collier’s book is related to energy. The growth in the world economy has driven up the demand for energy. Therefore, the existence of natural resources is one of the most important opportunities for the improvement in the LDCs, Collier says. The book concentrates on the importance of investment in extraction and suggests sale of resource extraction rights in exchange for infrastructure or aid by donors.

Continue readingGuest Post: Review of “Catching Up: What LDCs Can Do and What Others Can Help,” by Paul Collier
Published May 21, 2012

Look Who’s Talking: The Impacts of the Intrahousehold Allocation of Mobile Phones on Agricultural Prices

That’s the title of a new paper by my former student Ken Lee and I, in which we study the impact of mobile phone ownership on the prices received by farmers for their onions in the Philippines.

Here is the abstract:

Using data from the Philippines, we study the impact of mobile phones on the prices agricultural producers receive for their cash crop. We first look at the impact on price of mobile phone ownership at the household level. Because this masks a considerable amount of heterogeneity, we then look at the impact on price of the intrahousehold allocation of mobile phones. We find that whether the household owns a mobile phone has no impact on price, but whether a farmer or his spouse own a mobile phone is associated with a 5- to 7-percent increase in price.

In other words, it’s not whether there is a mobile phone in your household that seems to matter, it’s whether you have a mobile phone yourself (or whether your spouse does, depending on whether we keep outliers or not).

Continue readingLook Who’s Talking: The Impacts of the Intrahousehold Allocation of Mobile Phones on Agricultural Prices