Day 1: Research Session - Cities
The research session on ‘Cities’ was chaired by Professor Vernon Henderson (LSE). First, Professor Adam Storeygard (Tufts University) presented his work on “50 years of urbanisation in Africa: Examining the role of climate change”. The paper discusses the effect of climate change on urbanisation in Africa. The sample includes data between 1960-2010 from 29 countries and 366 provinces across Sub-Saharan Africa. The study asks what are the local effects of a decline in moisture on district level urbanisation, local city incomes and rural occupational structures. The results of the study show that declining moisture increases migration to cities, increases local city incomes (in cities with a manufacturing base) and there is a shift away from agriculture. Ashish Vachchani (Ministry of Finance, Government of India) commented that the paper was very policy relevant. He suggested that the authors should consider doing a follow up study, which studies the effects of urbanisation on poverty, HIV/AIDS and gender disparities. Dr. Martina Kichberger (Columbia University) noted that climate change is a window of opportunity to accelerate migration to cities in Africa; and this will only be possible by boosting the manufacturing sector.
Thereafter, Professor Simon Alder (University of North Carolina) presented his work on “Chinese roads in India: The effect of transport infrastructure on economic development”. The paper investigates whether the golden quadrilateral (GQ) highway project in India benefited the regional economy, and how would India’s development trajectory be if it had transport infrastructure like China. The results show that the GQ project benefited the targeted areas, while other areas lagged behind and if the lagging areas were better connected (as in the China case), they would have experienced higher growth. Ashish Vachchani remarked that the government is in the process of building railways to connect the interior regions of India. Further, he noted that the cost of building highways in India is much higher than China, given the complicated and costly process of land acquisition in India.
Finally, Professor Marco Gonzalez-Navarro (University of Toronto) presented his ongoing work on “Subways and urban growth: Evidence from Earth” which aims to estimate the effects of subway networks on city size, population and spatial configuration. The study uses UN World Cities data from 1950-2010 of 632 large cities worldwide. Preliminary results show that the effects of subways in the sample are in line with the effects of building highways using US data.
By Noopur Abhishek, Country Economist, IGC India-Central
Day 1: Research Session - Entrepreneurship
Professor Imran Rasul (University College of London) and Professor Greg Fischer (London School of Economics) chaired the session on entrepreneurship.
The session focused on the causes that determine the growth of entrepreneurship and its impact on the level of economic activity in poor areas and on the wellbeing of lower income strata.
Professor Rasul introduced the importance of entrepreneurship as powerful tool in a poverty alleviation strategy. Recent evidence from developing countries proved that enhancing entrepreneurship and private sector development led to job creation, innovation and helped to move households away from risk and uncertain forms of risk income generating activities as agriculture.
For the first presentation, Prof. Stephen Anderson Macdonald (London Business School) presented a randomized control trial on the impact of marketing skills on firm performance that took place in South Africa.
The study explores a new approach to stimulating entrepreneurship in emerging markets. The investigators measured the different impact on high-growth potential firm performance of a management education programme providing an intense intervention that focused on few key practices rather than on a general approach. The beneficiary firms were divided in two different groups receiving only one aspect of business management (finance versus marketing), and combining this with improved access to business information. The study sample comprised of 830 firms across sectors who received training for over 10 weeks.
Six months and twelve months after the graduation from the programme, evidence proved the survival rate grew up for both the treatment groups compared to the control. Similar results were also evident from the increasing number of employees, proving the impact of the managerial programme on the job market. In terms of across treatment comparison, sales rate proved to be larger for marketing group respect to the finance groups, while the finance trained group proved a more efficient input-output ratio and a the dramatic cost reduction, clearly disentangling the role of specific knowledge endowments on the different business outcomes. The endline results also showed that financially trained firms proved to be more stable in the market rather than firms trained in the marketing treatment group.
For the second presentation, Professor Mushfiq Mobarak (Yale University) presented the study on manufacturing growth in Bangladesh and the effect on the lives of girls and women. The study investigates the effects of the dramatic growth in the Bangladeshi ready-made garments industry (RMG) on the lives on Bangladeshi women.
The RMG sector represents a fundamental sector for Bangladesh employing 4 million workers, whose 80% are female workers. In fiscal year 2008-09, it accounted for 79% of exports and 14% of Bangladeshi GDP. Moreover, according to expert projections, this growth is expected to continue in the near future.
The study compares the marriage, childbearing, school enrollment and employment decisions of women who had closer access to jobs in the garment industry to women living further away from factories.
The data in the survey comes from a survey of 1,395 households conducted by the authors in sixty villages in four sub-districts of Bangladesh. These villages are in a peri-urban area outside of Dhaka city. To evaluate the effect of the proximity of the garment factory the study relied on a garment manufacturer’s association estimates that categorized 44 of the study villages as within commuting distance of a garment factory and 16 as not within commuting distance.
The presence of the RMG sector increases returns to education as one year more of education increases the wage in the garment sector by 3% and parents respond by keeping daughters in school longer. Also, access to factory jobs significantly lowers the risk of early marriage and childbirth for girls in Bangladesh, and this is due to both the girls postponing marriage to work in factories, and the girls staying in school at earlier ages.
Professor Blattman (Columbia University) discussed Professor Mobarak’s work presenting some preliminary results on the immediate welfare effects of industrialization in Ethiopia. The preliminary findings, an analysis of the impact of a randomized control trial where job applicants to a sweatshop factory were randomly offered or refused the job, proved to be controversial. In fact, according to Professor Blattman, it is not clear whether those applicants that got refused the job application are worse off in terms of health and income respect to those that were hired by the factory.
Finally, the presenters and the discussants advocated for more research on the role of private sector development and industrialization and its effect on worker wellbeing.
By Filippo Sebastio, Country Economist, IGC Bangladesh
Day 1: Framework Session - Cities
Professor Tony Venables (Professor of Economics, University of Oxford) presented the first IGC framework session which aimed to lay out the primary challenges facing cities in developing countries. His talk focussed on the “urban form” – how residential housing, businesses and infrastructure come together to produce a city that is both liveable and productive, the overarching objectives of cities. He began by discussing the basic monocentric city model where jobs and housing are disproportionately concentrated in the CBD which leads to increases in productivity. Yet this model doesn’t hold for African cities such as Dar es Salaam and Nairobi which 1) aren’t very dense, 2) have a center but also a large flat area and 3) have a large population mass which live over 10km from the city center. This means that the bulk of the labour force has to travel to the CBD, often on insufficient public transport.
Venables then went on to discuss the three parts of the “urban form”. Firstly, housing matters, particularly as it leads to employment and forms the bulk of the asset base in cities. However, you need a number of things in place for housing to be effective including good property rights, financial regulation, local infrastructure, building regulations and a construction sector.
Secondly, Venables focused on jobs and production. As already stated, cities allow for a concentration of economic and social activity which increases productivity – indeed doubling the size of a city increases productivity by 3 – 8% (Rosenthal & Strange survey). Yet most people in developing country cities are employed in non-tradeable services which leads to decreasing returns on labour. There is therefore the possibility for these cities to get stuck in a low level trap – “urbanisation without industrialisation”.
Lastly, he looked at issues of infrastructure, particularly the financing and selection of infrastructure projects. This flowed in to some policy recommendations to developing country cities: 1) improve central area transport, 2) encourage city density and 3) focus on building secondary cities.
Comments were then provided by Professor Wahiduddin Mahmud (Country Advisor, IGC Bangladesh; Professor of Economics, University of Dhaka). He began by stating that Bangladesh is among the top 10 fastest growing countries in terms of GDP in the last 20 years and its capital, Dhaka, is one of the fastest growing cities in the last 30 years. Yet in Dhaka, and in other developing country cities, there is more income inequality than in rural areas. This leads to increasing urbanisation and urban poverty. He concluded by focussing on issues of transport – most movement is done by poor people on foot, while investment tends to be for rich people driving cars.
Finally, Professor Nava Ashraf (Lead Academic, IGC Zambia; Associate Professor, Harvard Business School) discussed her project with the Zambian government on the National Urban Plan, with a particular focus on Lusaka. Ashraf used the ideas of reducing “bad contagion” e.g. water and sanitation, transport and corruption issues and enabling “good contagion” e.g. information sharing.
There were a number of interesting questions and comments, particularly surrounding the issue of secondary cities. The session was chaired by Claudio Frischtak (Country Director, IGC Mozambique; President, Inter. B – Consultoria Internacional de Negocios).
By Helen Sims, Communications Coordinator, IGC London Hub.
Day 1: Framework Session - Taxation and Development
The Taxation and Development session was chaired by Professor Sultan Hafeez Rahman. Professor Henrik Kleven (Professor of Economics, LSE) and Professor Asim Khwaja (Professor of Public Policy, Harvard Kennedy School) were the speakers. Professor Rahman said that the taxation is a crucial development issue and there is increasing policy interest in the taxation around the world.
Professor Henrik Kleven (Professor of Economics, LSE) presented first and described two current approaches to study public finance and taxation. The first approach is the big- picture – trying to study macro issues and answer questions like how does a government go from raising around 10% of GDP taxes to raising around 40%. The second approach is the nitty gritty or micro approach that focuses on tax administration, tax policy and other micro issues.
He then said that both him and his co-presenter Professor Asim Khwaja focus on the micro- nitty gritty approach in this presentation.
Professor Kleven covered two aspects of the micro approach of studying public finances- (a) enforcement and (b) tax policy.
While speaking about tax enforcement- he described four key components of the tax enforcement- they are (a) audits (b) penalties (c) third party information reporting and (d) other verifiable information trails. All these components are weak in developing countries. He also said that there is a negative relationship between the self employed population and tax to GDP ratio of countries that affect tax enforcement capacity of the developing countries. He presented an example of Denmark, a developed country that has the record tax to GDP ratio in the world and said that the reason behind such high tax GDP ratio is the tax information reporting system of the country. In this background, he said, the Policy lesson for developing countries is not to try and replicate the Danish information reporting system as the success of the system is based on many context specific factors are like tax administration, self- employment, industrial composition, firm size and complexity, financial sector, scope for evasion substitution.
While speaking about Tax policy, he said that the two most important recommendations from literature are to use progressive income taxes and VAT and do not use capital tax, differentiated consumption taxes (except for externalities) and taxes on turnover. Even for the tax policy, he said, the recommendation for IGC countries is not to replicate policies from high income countries but to consider the specific context.
The next speaker, Professor Asim Khwaja (Professor of Public Policy, Harvard Kennedy School) started his presentation with three important points about taxation. (a) people matter – both the tax staff and citizens matter for taxation (b) people (generally) act in their self-interest and (c) policies/systems work better when designed to account for the fact that people act in their self-interest.
He then spoke about specific tax administration issues in developing counties and presented broader civil service reform issues related to tax services in developing counties like low payments to tax authorities and lack of career development opportunities for them. He then presented results from his empirical study from Pakistan which shows that there is a substantial increase in the total revenue collection if the tax administration people are paid based on their performance.
He concluded his remarks with policy recommendations for developing countries and said that- rather than relying on transplanting developed country solutions/tax codes/ procedures, developing counties should take more a nitty-gritty micro approach grounded in the specific context and constraints of the country in question. It’s hard but doable.
By Vikas Dimble, Country Economist, IGC India-Central
Day 1: Country Session - Ethiopia
Chaired by Pramila Krishnan (University of Cambridge and the IGC), the Ethiopia Country Session was opened by Professor John Sutton (LSE) who described the progress IGC has made with reforming the Ethiopian Investment Commission (EIC). He also discussed why Ethiopia has a real chance of industrializing in the next decade. The key indicators include Ethiopia’s potential to set up the middle manufacturing base which is crucial for industrialization. For instance, 80% of jobs come from the 10% of mid-size and large firms. He further noted that the EIC has become more competitive and efficient in recent years as a result of IGC’s engagement with the EIC. This has been recognized by the government of Ethiopia, and the EIC has been promoted from an Agency to a Commission. Thus, the EIC is now directly responsible to the Prime Minister. As a result, the EIC’s responsibilities have been extended to include Export Promotion and Export Zones. In his closing remarks, he highlighted potential areas of future engagement with the EIC, including a planned series of DFID-funded projects which will provide support for the new Export Promotion section of the EIC.
Douglas Gollin (University of Oxford and IGC) raised an interesting question about how to integrate structural transformation in developing countries. He provided empirical evidence from IGC-funded on-going microeconomic research projects which suggest that the range of available goods in particular and living standards in general decrease with distance from major urban centers (and with decrease in population densities) in Ethiopia. He, then, described the potential policy issues and options around structural transformation in these settings. He further emphasized that we should be able to think more carefully and come up with more coherent policies relying on existing evidences from micro and macroeconomic studies.
Nigusse Gebre Gebremedhin (Vice Director General, Technical and Vocational Education and Training) focused on discussing the functioning of the Technical and Vocational Education and Training (TVET) program and its opportunities and challenges identified by the Ministry of Education. He emphasized the importance of making graduates from the TVET program competitive in the national, regional, and international markets is crucial to become competitive in the global commodity market. One of the attempts taken by the Ministry of Education in this regard was incorporating the Ministry of Industry and other government organizations in the supervision of TVET program to ensure better matches between the skill sets acquired by TVET graduates and the skill sets employers demand. He closed his presentation by inviting IGC and its researchers to help the Ministry of Education by providing further support on how the Ministry can make TVET graduate more competitive.
These presentations were followed by active discussions between presenters and participants, which consists of both Ethiopian & international researchers and policymakers from Ethiopia, including H.E. Ato Newai Gebre-ab.
By Yared Seid, Country Economist, IGC Ethiopia
Day 1: Country Session - Pakistan
The Pakistan Country Session at the annual Growth Week was chaired by Dr. Ijaz Nabi, the country director for IGC Pakistan. The first presentation was made by Dr Ehsan Choudhri (Carelton University) on his work on monetary policy with the State Bank of Pakistan. The study examined the role of credit markets and foreign exchange in influencing the effectiveness of monetary policy in Pakistan. He shared the DSGE model, customized to findings from Pakistan that was developed to improve financial forecasting at the State Bank. The important policy conclusions were that interest rate changes have a weaker impact on inflation and output gap and that the ability of the State Bank to control inflation can be improved considerably if fiscal policy focuses on debt control.
The second presentation was made by Dr Ali Hasanain (Oxford University) on the relationship between personalities, job performance and responses to experimental policy changes in Punjab. They used (i) Big Five personality and Perry Public Sector Motivation tests of health inspectors, senior health officials and doctors; (ii) measures of job performance from unannounced visits to health facilities; (iii) a randomized evaluation of smart phone monitoring technology; (iv) experimental manipulations of the presentation of data on doctor absence to senior health officials, to test various hypothesis. The key findings of this research have been that personalities predict doctor attendance and whether they collude to falsify results. Smartphone monitoring has the largest impact on health inspectors with high Big Five characteristics. Senior health officials with high Big Five characteristics are also more likely to respond to underperforming facilities by compelling better subsequent staff attendance.
The next presentation was made by Professor Asim Khwaja (Harvard University) on merit based transfers and postings. He spoke about his previous project with the IGC on property tax that tested incentives for tax inspectors and its impact on tax collection. The current project replaced monetary rewards with placements in certain locations based on the premise that both pecuniary and non-pecuniary (promotions, social recognition, non-monetizable benefits) incentive mechanisms are essential for an optimal HR policy. The speaker however mentioned several challenges to introducing a merit based transfers and postings system. The project is still on-going in collaboration with the Department of Excise & Taxation to answer two key questions: can merit based transfers and postings be an effective and feasible way to incentivize and what would be the best mechanism to allocate staff geographically.
The final presentation was made by Dr Theresa Chaudhry (Lahore School of Economics) on a project that studies the performance of the garments industry in Pakistan vis-a-vis Bangladesh. The work presented the design and motivation of the study that builds on work already done on garments by Rocco Macchiavello in Bangladesh. The presenter and her team intends to undertake an international productivity benchmarking and highlighted that so far data collection from 7 factories had been completed and a supervisor survey was currently being conducted in the field.
By Hina Shaikh, Country Economist, IGC Pakistan
Day 1: Country Session - Ghana
The Ghana session at Growth Week 2014 focused on Natural Resource Management in Ghana, particularly, Small-Scale Mining. In the first part of the session the Deputy Minister for Lands and Natural Resources, Hon. Barbara Serwaa Asamoah presented the policy questions and challenges in the Management of Natural Resources in Ghana. She indicated that small-scale mining is a very important part of the economy making up 34% of total mining in 2013 and employing over 1 million people in Ghana currently. However, it presents a lot of environmental, social, security and economic challenges for the country and in spite of an elaborate legal framework in place, compliance is a major problem that government faces. She therefore called on IGC researchers to help her ministry to understand and experiment on ways to deal with the problem. Mr Franklyn Ashiadey, a Principal Economist at the Ministry of Finance and the Ghana Extractive Industries Transparency Initiative (EITI) also highlighted questions on the role of mining in the development history of Ghana and going forward; a cost benefit analysis for mining in Ghana; how to achieve fairness in the distribution of revenue from mining; how to improve mining revenue collection in Ghana.
In the second part of the session Professor Gavin Hilson presented the findings from an ongoing IGC study on “The informalisation of Ghana’s small-scale gold mining in Ghana: drivers and policy implications”. The study found that part of the problem of small scale and illegal mining in Ghana is due to the difficulties with obtaining a licence, inappropriate institutional support and lack of land. He recommended that more land should be made available by taking it from concession holders who are not using it. He also recommended that the licensing process be streamlined and made easier, reducing the incentive to mine illegally. Professor Gordon Crawford also presented findings from his IGC study on “The impact of Chinese involvement in small-scale gold mining in Ghana” which found that small-scale mining has transformed to large-scale mining with huge impacts on the environment and the communities. He showed that while some of the economic impacts are positive, there are mostly negative impacts socially with conflict and security issues in the communities. He also recommended a review of the small-scale mining laws of Ghana to take account of the transformation that has taken place as a result of Chinese involvement.
By Henry Telli, Country Economist, IGC Ghana
Day 1: Country Session - Rwanda
IGC Rwanda has developed strong thematic focuses in the areas of taxation, trade, public sector performance, and urbanisation. Rwanda’s Growth Week session reflected this, with presentations on washed coffee exports, performance contracts, and electronic billing machines to increase VAT compliance.
1. Rwanda’s Minister for Trade and Commerce, Honorable Francois Kanimba, opened the session, setting the scene for growth and development in Rwanda, praising the extent and quality of the IGC’s research and policy analysis services to his Ministry since 2010, and requesting the researchers present to stretch even further to inform Rwanda’s urgent efforts to multiply export revenues manifold.
2. Dr Rocco Macchiavello and Ameet Morjaria’s presentation built on three years of research into Rwanda’s washed coffee export sector, involving both interviews with farmers and other stakeholders, and analyses of huge amounts of data. They find that Rwanda could increase export earnings by 10-20% by doubling washed coffee exports (even holding quality constant), and suggest that this could be achieved by relieving credit constraints on coffee washing stations, by encouraging farmers to sell cherries on credit, itself achieved by better contract enforcement between farmers and stations.
3. In Rwanda, all civil servants and public sector institutions sign performance contracts, publicly committing to certain tangible deliverables over the course of the following year. These have been somewhat effective, but President Kagame has recently called for a major revision of the system following excessively high scores (ranging from 90-97%) and poor correlation with development outcomes. Professor Andrew Zeitlin’s presentation offered suggestions for a revamped system, in particular recommending: 1) that performance indicators, as far as possible, be results in the control of the contracted individual; 2) that indicators should be inherently effective actions/outputs not subject to gaming (to avoid cases such as that in the USA, where typists were paid per letter, and so spent their lunch breaks typing gibberish); 3) that as far as possible, all these effective actions that the government/line manager wants the employee to perform should be included in the employee’s performance contract, due to incentives to focus on tasks in one’s contract to the detriment of those not included. Professor Zeitlin highlighted that in order to achieve these changes, Ministries, and the Government as a whole, would need to invest in mapping the ‘causal chains’ necessary to bring about their desired development outcomes, down to the level of individual actions.
This presentation was met with helpful critique from Doreen Kagarama of the Office of the President, who argued that performance contracts in Rwanda are effective because of the ‘public commitment’ to targets rather than monetary incentives, and asked how contracts could balance the needs of planning with the need to respond flexibly to opportunities and challenges that arise. Kagarama asked that in the final draft, the IGC include a discussion of how to regulate contracts to ensure that all contractees are equally ‘stretched’ relative to their abilities, and that ambitiousness and realism are properly balanced.
4. Most medium to large retailers in Rwanda must now use Electronic Billing Machines, which send sale information directly to the Rwanda Revenue Authority at each payment. The IGC conducted an impact evaluation of this scheme, and in this session Professor Nada Eissa reported that EBM machines had caused adopting firms to increase their VAT payments by an average of 8%, with even higher effects amongst small firms, construction firms, firms working in computing, and restaurants. A complementary ‘mystery shopper’ study found that firms with active EBM machines only gave receipts 21% of the time, but that this increased to 60% when shoppers were instructed to ask specifically for EBM receipts. Thus, Professor Eissa concluded that EBMs were effective, and could raise VAT payments even more substantially with increased consumer demand for receipts, which might be achieved through a strengthening of the VAT lottery and consumer education campaigns.
Finally, Professor Eissa highlighted that prices rose by approximately 10% when EBM receipts were issued (compared to the 18% VAT rate), and that combined with the large cost of the machiens (£300), this indicates that firms face serious price competition from MSMEs that are exempt from EBM and VAT requirements. Professor Eissa, and the discussant, Deputy Commissioner General of the Rwanda Revenue Authority Richard Dada, thus discussed the costs and benefits of rolling out EBM to all firms regardless of size.
The Deputy CG praised the study and said it would be used to inform the shape of the roll-out of EBM across sectors and firm sizes, and that it had encouraged RRA to seriously improve their receipt lottery and other consumer-centred methods to increase compliance.
By Sally Murray, Country Economist, IGC Rwanda
Day 1: Country Session - Tanzania
The Tanzania country session was chaired by IGC Lead Academic Professor Chris Adam (Oxford University).
First Part: Land Markets and Public Infrastructure. Dr Matthew Collin (Center for Global Development) talked about formal property rights (in the form of certificate of rights of occupancy – CROs) in Dar-es-Salaam in the context of an RCT, where the intervention aimed at lowering the costs of access and encouraging co-titling with spouse. He showed that infrastructure upgrading is positively correlated with the demand for CROs. Dr Martina Kirchberger (Columbia University) presented forward-looking work on road infrastructure in Tanzania to explore ways to improve the efficiency of public spending. Sam Wamgwe (REPOA) discussed the two presentations on urbanization and emphasized their policy relevance.
Second Part: Exchange Rate and Revenue Mobilization. Ben Langford (IGC Tanzania) presented on-going work that will explore the scope for improvements in tax revenue mobilization in the EAC in the light of a widening gap between tax expenditures and aid revenues. Professor Chris Adam’s presentation illustrated exchange rate dynamics in Tanzania and the EAC with a focus on the capital account and market structure and set the ground for the team’s future research work on monetary policy. Dr Aikaeli (University of Dar Es Salaam) underlined the need to increase the tax base to increase resource mobilization in order to reduce poverty. Dr Mwamba (Bank of Tanzania) emphasized the potential positive effect of the opening of the capital account as well as the natural resource economy.
Third Part: Firms and Industrial Policy. Professor John Sutton (LSE) described his ongoing strategy development with the Tanzania Investment Centre. While Professor Margaret McMillan (Tufts University) outlined her recent scoping visit and areas of interest for future IGC work on firms and industrial capacity in Tanzania. Adam Gahhu (Tanzania Private Sector Foundation) welcomed the support of the IGC in the area and emphasized the lack of government capacity to partner with and support new investors.
By Marguerite Duponchel, Country Economist, IGC Uganda
Day 2: Research Session - State Capabilities
Chaired by Henrik Kleven (LSE), the state capabilities session opened with a presentation by Mushfiq Mobarak (Yale University) on boosting tax revenue collection in Bangladesh. The motivation for this research project stems from the fact that tax revenues collected as a share of GDP tend to be lower in developing countries than in rich countries. In this project, the authors implemented a randomised intervention to see whether peer recognition could be an effective way to motivate firms to pay taxes in Bangladesh. The results of this paper indicate that social incentives did indeed have a significant effect on total tax payments, through both increasing the propensity to pay and the amount paid by firms.
The second presentation was by Karthik Muralidharan (UC San Diego) who presented findings from the paper, “Building State Capacity: Evidence from Biometric Smartcards in India”. The authors of this paper worked with the government of Andhra Pradesh state in India to randomise a large-scale rollout of biometrically authenticated electronic payments for two flagship social welfare programmes in India. There were significant positive impacts of this intervention: payment processes got faster, more predictable, and were less prone to corruption. In addition, the project was highly cost-effective, and had strong support from the poverty programme beneficiaries. Muralidharan highlighted the potential for introducing similar systems in other countries, but emphasised that having political will is essential for effective implementation.
The final presentation of the session was by Claudio Ferraz (PUC-Rio and BREAD). He posed the question: in the absence of policies that exogenously provide information, can voters learn about the quality of politicians by observing policy choices? The paper presented aimed to answer this question by studying the case of Brazil, where a large number of coastal municipalities received an unexpected oil revenue shock in 1997. In particular, Ferraz uses the case of the 1997 oil shock to study whether voters rewarded incumbent politicians for increased government spending due to oil revenues, or whether the performance of the politician also played a role. His results showed that the unexpected revenue windfall helped incumbent politicians get re-elected in the short-run; however after voters learned about the windfall, success in re-election depended on the quality of politicians’ performance.
By Miska Daredia, Country Economist, IGC Ethiopia
Day 2: Research Session - Energy
The purpose of this session was to present IGC-funded research on energy. It was chaired by Professor Michael Greenstone, Director of the Energy Policy Institute at the University of Chicago and the Research Director for the IGC’s Energy programme. Professor Greenstone highlighted the importance of energy in economic growth, saying that there is a strong correlation between the available of energy and living standards.
The first research presentation was by Professor Nicholas Ryan (Yale University). Titled “Lighting up Bihar”, it highlighted an incentive scheme for increasing electricity distribution revenue in the state of Bihar in India. The research project aims to increase revenue of the electricity utility by providing an incentive to electricity users at the level of the feeder area. These incentives include higher supply of electricity. They found that revenue from electricity consumers improved dramatically in only two months in the area where the incentive of higher electricity was provided. This pilot is now being expanded in Bihar.
Responding to this, Mr. Sanjay Kumar Singh, Secretary to the Chief Minister, Government of Bihar said that there was a clear commitment from the Chief Minister to improve electricity provision. This increased support for this scheme also provided a signal to electricity consumers that the Government is committed to providing more electricity if consumers pay for electricity in full.
The second presentation, by Prabhat Barnwal (Columbia University) was on the impact of a direct benefit transfer mechanism for cooking fuel subsidy in India. India’s cooking fuel subsidy is provided by reducing the price of a certain kind of LPG cylinders for domestic use. Due to this subsidy, a large black exists to sell the cheaper LPG cylinders to non-eligible users.
The Government decided to link the distribution of these subsidized LPG cylinders with biometric identification of eligible households, by linking each eligible LPG customer to his/her unique identification and linked bank account. Subsidies were transferred to the bank account of eligible households instead of reducing the price of the LPG cylinder.
Mr Barnwal tried to estimate how this policy reduced leakage of subsidy which is a perennial problem. When this policy was introduced, there was a drop in total LPG consumption for those households that were paid the subsidy using the biometric identification, compared to the comparison group. The price of LPG cylinders in the black market was also affected after this policy is implemented. Thus, biometric verification was effective in reducing leakage and the fiscal burden of the subsidy for the period under review. These results can be generalized and biometric verification of eligible households to link subsidy payments can be extended to all welfare and subsidy programs.
By Sohaib Athar, Country Economist, IGC Pakistan
Day 2: Research Session - Trade
Professor Andrés Rodríguez-Clare (University of California, Berkeley) and Professor Eric Verhoogen (Columbia University) chaired the Trade session. Honourable Francois Kanimba, Minister of Trade and Industry of Rwanda made opening remarks for the session where he underscored the importance of international trade on economic growth and productivity. Export led growth is important for many developing countries including Rwanda and trade can transform lives of millions of people around the globe.
Professor Amit Khandelwal (Associate Professor, Columbia Business School) presentation “Trade and Productivity: Some Evidence from India and China” focused on how with the removal of trade barriers, aggregate industry productivity rises as unproductive firms exit and resources reallocate to productive firms. Trade reforms can deliver larger-than-expected gains if it can reform or eliminate misallocating institutions. This is illustrated by the misallocation under the Multi-fiber Arrangement in China; when quotas ended in 2005, the market share of incumbents fell substantially -virtually the entire market share lost by incumbents was from State owned Enterprises in the apparel industry, while all of the gain by net entry was due to privately owned firms.
Trade liberalization and tariff reforms enhance within-firm productivity through improved access to intermediate inputs. Input tariff liberalization leads to imports of new inputs varieties which in turn lead to domestic product expansion. Topalova and Khandelwal (2011) find that 10 percentage point decline in input tariffs raises TFP by 4.8% in India. The results underscore the importance of input tariff liberalization in India’s case.
Professor Nico Voigtländer (UCLA and NBER) presentation on “Exporting and Plant-Level Efficiency Gains: It’s in the Measure” find that Trade liberalizations leads to within-plant efficiency gains; production costs drop by 15-25 percent and much of these gains are passed on to customers in the form of lower prices. In the study, authors use marginal production cost as an alternative efficiency measure as opposed to revenue productivity on a panel dataset of Chilean manufacturing plants (time period:1996-2005) to examine effects of (a) Export entry and (b) Export expansions of established exporters.
The study concludes that revenue productivity fails to capture or substantially underestimates efficiency gains. The most likely driver of efficiency gains are that export entry/expansion provides incentives to firms for investment on technology improvement. A main policy implication of the paper is the need to combine trade liberalization with incentives to that will spur investment in modern technology adoption by firms.
Professor Chris Woodruff (University of Warwick) presentation on “Trade and Productivity: Buyer Quality and Efficiency in the Bangladesh RMG Sector” demonstrate substantial heterogeneity in productivity across lines within plants using sewing operations production line level data of export oriented firms in the ready-made garment (RMG) sector, in Bangladesh. The buyer quality is measured by the average of the residuals across all product categories in which the buyer is active and seems to provides robust estimates.
The analysis shows that productivity is higher when firms produce for higher-end buyers, even so the same line of production. It is not clear however, if this can be attributed to learning.
The data analysis on measures of capital and labor quality is still being conducted. In addition, analysis of persistence effects on the production line will shed light on whether producing for a high-end buyer lead to higher productivity in subsequent production for lower-end buyers. The authors are also collecting data from factories in Pakistan, and plan to do so in other countries as well.
By Farria Naeem, Country Economist, IGC Bangladesh
Day 2: Framework Session - Management Capacity and Productivity
The session focused on understanding whether developing countries are held back by firm management.
There is evidence that management practices in developing countries are weak by global standards. If this is related to productivity – also much lower in developing countries – we could improve GDP per capita via better management practices.
John Van Reenen presented evidence from the World Management Survey.
Overall, the evidence suggests that management practices are critical to productivity, and this was backed-up by firm-level case studies where some firms were injected with better management practices and productivity increased.
The question, then, is what holds back management and how can policy change it?
One aspect is that foreign multinationals consistently achieve good management practices wherever they are located. A second aspect is competition: firms which feel more exposed to competition have better management. Ownership is also important: family-run firms typically have much worse management. Also, higher human capital and education, not just of management but of employees, is correlated with better performance. Interestingly, self-assessments of performance are not linked to productivity – suggesting managers do not know accurately how well or badly the firm is managed.
What are the policy implications? First, openness to foreign direct investment can be one avenue to improve management. Secondly, consider fostering better competition: regulation and competition commissions. Third, succession planning for family firms, as well as abandoning tax incentives which may be in place that favour keeping firms family-run. Fourth, the importance of education and human capital has been highlighted, although it remains a general challenge. Finally, there is a role for providing advice and information to firms.
Broadly, what perhaps prevents firms from adopting better practices? Trust outside the family and the rule of law are important – although hard to change.
Dr Louis Kasekende, deputy governor of the Bank of Uganda, offered a perspective from Africa: the average Ugandan firm is much smaller than the average size in Van Reneen’s sample. His question is how important are better practices for smaller firms, and do they have different barriers compared to larger firms? He asked what, specifically, are the policies they could adopt for improving small firms’ productivity.
However, knowledge to answer this question remains uncertain. Moving forward, research is likely to explore how management practices can be better adopted in developing countries, and what more focused policy options may be.
By Charles Beck, Country Economist, IGC South Sudan
Day 2: Framework Session - Transforming the Public Sector
How do states attract, retain, and motivate agents in public service delivery? Do public servants work for material incentives or because they care—or is that the wrong way to think about it?
Oriana Bandiera of the LSE reviewed evidence that material incentives can work, and can sometimes work even better for ‘pro-social’ individuals than for others. On the other hand, performance pay can also select on the wrong indicators and motivate corruption.
Bandiera suggested that economists have focused on the negative (crowding out motivation), and not the positive (how to strengthen it). The next step, she said, was to design incentive schemes that harness pro-social motivation.
At the macro level, Chris Blattman of Columbia University discussed the process of ‘learning and scaling what works in an uncertain world.’ Focusing on a $15 million post-conflict fund in Liberia, Blattman went through a number of evaluations of pilot projects carried out in step with the government and humanitarian NGOs. Liberia successfully set up the funded projects to include evaluation and learning components in a ‘trial-and-error’ process. Yet scaling up of even very successful programmes was low.
Blattman used the example to ask broader questions – who has an incentive to scale up successful small projects? NGOs mainly work on a smaller scale, ministries may lack capacity or credibility, and the UN and WB are not structured to reward ‘indigenous successes’ where innovation is shored up with evidence. Blattman called for more work on the political economy of reform processes themselves.
In Q&A, Paul Collier emphasized organizational culture in public service, where ‘something happens in ineffective organizations that leads to deterioration.’ Rachel Glennerster asked whether the aid funding structure ‘rewards coming up with a new programme rather than scaling up something for which you found evidence.’
By Mari Oye, Country Economist, IGC Myanmar
Day 2: Country Session - Zambia
The session was opened by the Country Director, Alan Hirsch, who introduced the IGC programme including staff and presenters.
Three presentations were made; the first one; ‘The urban Research Agenda: In Zambia and elsewhere’ is a result of a core-generation process by Professors Ed Glaeser and Nava Ashraf in Zambia in August 2014. The second was on ‘The Impact of Teaching Negotiation Skills to Girls on Schooling Outcomes’ by Nava Ashraf and the third was on ‘Birth, Death and Survival of Exports in Zambia’ by Joseph Simumba from the Zambia Institute for Policy Analysis and Research.
Professor Ed Glaeser (via video-conferencing) gave an overview of the growth of the urban population across the world and how countries stand to benefit from the agglomeration economies that come with the growth of cities. He also noted that there is significant correlation between urbanisation and incomes within and across countries. He however, noted that as cities expand they promote both bad and good contagion. Bad contagion to mean that disease can easily spread due to proximity. He gave a recent example of the Ebola epidemic that has currently affected some of Africa’s cities. Professor Glaeser however observed that the downside of urbanisation can be addressed through responsible policies such as the provision of clean water. Good contagion on the other hand refers to the positive effects of agglomeration such as the spread of ideas which characterises dense cities.
Professor Nava Ashraf focused on the identification of research gaps in water, industrial clusters and skills development. On water, the main issues are to assess if there are enough private benefits to incentivise households to connect to water or whether there are too many social benefits to consider a household subsidies for water connection. In the area of industrial clusters, the interest is to test the spread of business ideas among cluster members while the skills development project would assess productivity of Zambia’s labour force if skills were provided.
Mr Bernard Kamphasa who is the Permanent Secretary for Policy Analysis and Coordination in the Zambian government was the discussant to the urbanisation paper. He pointed that Zambia is in the process of developing an urban policy and sees the work of the IGC as potentially useful for government. He also pledged his government’s support to the core-generation model with IGC researchers.
The second paper by Nava Ashraf was an overview of the project that has been training girls in Zambia on non-cognitive skills. Professor Ashraf noted that Zambia has high school drop-out rates for grade 7 up to 12. For females, the rates are 3 times as much as boys. This is due to various demands placed on girls which limit the amount of time spent in school. Negotiation skills are therefore meant to empower girls so they can negotiate with their parents for time and for money to remain in school.
The third paper by Joseph Simumba, which used Zambia Revenue Authority’s export transactions data, highlighted that Zambia’s exports have been growing in previous years though the mining sector accounts for most of the growth (70-75%). However, non-traditional sectors of the economy have also continued to grow as the government pursues diversification policies. The results of the paper show that about 50% of new exporters do not go beyond their first year of exporting, meaning that the rates of exit are very high. The results also showed that the year on year growth in exports recorded in Zambia actually come from new exporters and is not an indication that exporters have a long life span in the export market.
On policy implications the paper pointed out that it appears that new entrants lack knowledge of the export market until they get in the business and fail. It would be useful as a matter of policy to train would be exporters on the characteristics and challenges of the export market if survival is to be assured. Exporters also tend to behave in the same way as investors in the sense that they wouldn’t export in times of economic uncertainty.
In discussing the paper, governor of the Zambian Central Bank, Dr Micheal Gondwe agreed with the paper’s findings and acknowledged the role mining plays in Zambia’s exports as well as the rising significance of non-traditional exports. He further pointed that exporters in Zambia face various challenges including lack of training on the nature of the export market. He further pointed the lack of infrastructure such as good roads Zambia being a landlocked country. Other challenges include access to finance which means that Zambian exporters have to compete with other exporters in the international market who may have access to cheaper credit. However, the governor also observed that African exporters will need to take advantage of regional markets for them to grow rather than focusing on European markets. He cited Kenyan exports to COMESA which are more than total exports to Europe.
By Felix Mwenge, Country Economist, IGC Zambia
Day 2: Country Session - India-Bihar
Chaired by Dr. Shaibal Gupta, Co-Country Director, IGC Bihar, the session opened with a Presentation by Dr Clement Imbert (Oxford University), who presented the findings of his study ‘Information Technology, Transparency and Corruption in Public Programs: Evidence from a Large Workfare Program in Bihar’. Dr Imbert showed that the introduction of Centrally Monitored Performance Monitoring System (CPSMS) in transferring funds to Panchayats resulted in reduction in expenditure at Panchayat level without having any negative impact on employment creation and asset construction. The CPSMS seem to have reduced leakage in MNREGA by reducing the asset level of Panchayat level NREGA functionaries.
The Second presentation was made by Dr Johannes Urpelainen (Columbia University). He share the preliminary results of his study ‘Solar Power of Street Vendors: problems with the centralized charging stations in urban markets’. He argued that energy poverty among the urban street vendors is a major major constraint: around 80 percent of the vendors rated improved lighting as the ‘top priority’.
Dr P. P. Ghosh discussed these presentations and made several useful comments.
The second part of the session was a panel discussion on ‘What Next for Bihar’. Senior policy makers from Bihar – Anjani Kumar Singh (Chief Secretary), Rameshwar Singh (Finance Secretary), Sanjay Kumar Singh (Secretary to the CM) –participated in the session. Mr Rameshwar Singh made a presentation highlighting the achievements of Government of Bihar in the last 7-8 years. He said that the government should continue with the current level of spending on social sectors but Bihar needs to formulate policies that can increase the effectiveness of government expenditure. Mr Anjani Kumar Singh listed the priorities of the Government of Bihar: upgrading the skill of youth of Bihar; improving the power availability; policies to improve the quality of education; greater investment in human capital; Need for value addition in agriculture by providing marketing facilities to the farmers; continue with the policy of positive discrimination for women. Mr Sanjay Kumar Singh explained how the government is not only working towards improving the connectivity and access to power but also simultaneously trying to improve the quality of electricity. He argued that Economic growth is directly linked with the development of energy sector.
Montek Singh Ahluwalia argued that Bihar’s growth should be compared with the performance with other poorer states.
By Chinmaya Kumar, Country Economist, IGC India-Bihar
Day 2: Country Session - Mozambique
The session started with Professor Sandra Sequeira (Lead Academic, IGC Mozambique) giving a brief overview of the IGC Mozambique research agenda and of the ongoing research projects.
After that, the first presenter, Dr. Christine Valente (University of Bristol) presented the structure of her ongoing randomized control trial experiment in Mozambique. She is seeking to understand whether conditional transfers, in cash or in-kind, could prevent girls from dropping out from school. After her presentation, Mrs. Antuia Soverano (Director of the Primary Schooling department, Ministry of Education in Mozambique) provided some constructive comments to her study from the policy perspective. The main issue she raised is that while conditional transfers programmes in theory could be a very good instrument to ensure that girls remain in school, the main challenge that they pose to the government is very practical: they are very unlikely to be financially sustainable in the medium/long-run.
The second presenter, Professor Pedro Martins (Queen Mary, University of London) proposed an overview on the existing policies of vocational training in Mozambique. Among those, a crucial one was the establishment of the National Institute of Vocational Training (INEFP) with the professional training law of 2014. In parallel, he noted that in Mozambique there is also a recent upsurge of private training providers offering specialized programmes for private clients. He then concluded with three main policy recommendations to enhance the quality of the existing vocational training schemes: (1) expanding the training centres network, (2) focusing on the training needs of labour-intensive export sectors (like food/beverages, tourism, etc) and (3) promoting foreign investment in training provision.
Finally, Mr Refinado Bila Junior (National Institute of Employment and Vocational Training) discussed some challenges in the actual implementation of these recommendations for the Mozambican Ministry of Labour, like for example the lack of specialized machinery or human resources to effectively deliver targeted training schemes. The discussion was then opened and a series of questions came directly from the floor, which was mainly composed by researchers and polcymakers like diplomats from the Mozambican High Commission in the United Kingdom.
By Novella Maugeri, Country Economist, IGC Mozambique
Day 2: Country Session - Liberia and Sierra Leone
Herbert M’cleod, Country Director of IGC-Sierra Leone and Dr Eric Werker, Country Director of IGC-Liberia chaired the Liberia and Sierra Leone Country Programme session at Growth Week 2014.
Dr Rachel Glennerster, Lead Academic of Sierra Leone, opened with Commercialisation of Smallholder Agriculture: Recent Research Findings from Sierra Leone. The studies included research on cocoa, palm oil, rice, and rural road rehabilitation, and how the interventions and behaviours observed contributed to yields, seasonality of prices, the incidence of malnutrition, and transport and search costs. She was followed by Dr. Joseph Kargbo, DG of the Sierra Leone Agricultural Research Institute who spoke on A Century of Agricultural Research and Policy, outlining barriers to productivity, as well as past, current, and potential approaches to and research on market dynamics, value chains, expenditures on agricultural development, and rural poverty, emphasising the latent potential for productive arable land and improvements in food quality.
The Liberia portion of the session began with Oyebola Okunogbe’s (Harvard Kennedy School) presentation, Increasing Property Tax Compliance in Liberia, which investigated methods towards improving tax morale and government tax enforcement capacity. She was followed by IGC Country Economist John Spray, who discussed Price Controls in Uncompetitive Markets with Weak Institutions. This research analysed the natural experiment of price ceiling removal in the late 2000s, finding that retail goods previously subjected to controls increased relative to exempted ones, that less elite markets were already so competitive as to preclude any price reductions, and that price ceilings might have helped suppress monopoly prices. Discussant Jaime de Melo suggested future research on competition policy in Liberia, including the areas of pricing to market and the potential for an open trading regime.
By Anne Laski, Country Economist, IGC Tanzania
Day 2: Country Session - Uganda
The session was jointly hosted by Drs. Louis Kasekende (Deputy Governor of the Bank of Uganda) and Richard Newfarmer (Country Director of IGC Uganda).
The first paper, on poverty dynamics, was presented by Prof. Andy McKay (University of Sussex) – joint work with Dr. Sarah Ssewanyana (EPRC Uganda) and Dr. Marguerite Duponchel (IGC Uganda). Prof. McKay began by outlining the recent economic history of Uganda and highlighted that increases in living standards have not been progressing since the financial crisis and its economic fallout. Lower growth rates have partly been the result of frequent droughts.
The data used in the study comes from the Uganda Bureau of Statistics and is a four wave panel survey conducted between 2005/06 and 2011/12 with 3,000 housholds (HH). The key measure of poverty in this context is consumption data. In general terms, the North is the poorest region and the East of Uganda has the highest absolute number of poor. According to the panel, poverty numbers were up in all regions except Central, with the highest increase in the East.
In terms of the effects impacting poverty numbers, the availability of community infrastructure such as health facilities is correlated with lower poverty figures. Other factors reducing poverty are education and credit access, whereas drinking alcohol and being engaged in agricultural labour are associated with higher poverty. A major barrier to poverty reduction is the high dependency ratio.
Dr. Albert Musisi (Ugandan Ministry of Finance, Planning and Economic Development) was the discussant, presenting results of the government’s own poverty analysis. Strikingly, those figures show a sustained reduction in poverty that is quite at odds with the largely stable or rising overall poverty evidence emerging from the panel data set. Income inequality and the panel nature of the data may be two reasons for the divergence of results. He concurred though that poverty is a serious issue and that skills and infrastructure are good poverty reduction measures.
Marguerite Duponchel then looked at household survey evidence of a gender gap in agricultural productivity. The data is for 630 HH and around 7000 plots of which around half are female-managed. With her co-authors from the World Bank she found that there is a gender gap of around 17.5% without controls and 37.7% when controlling for inputs, land quality etc. These are the results of an Oaxaca-Blinder decomposition approach. In terms of the policy implications, child care constraints are an issue that could be addressed with low cost options. Also, the promotion of high value crops for females and bringing extension closer as transport costs are high would be promising approaches. Inputs apparently don’t matter so much in this context.
Instead of discussing the paper, Prof. Jakob Svensson (Stockholm University and IGC Uganda Lead Academic) then presented preliminary results of his research. Interestingly, these showed that all the fertiliser samples analysed contained less nutrients than necessary for good effects, on average 40% less so. If good fertilisers were used, triple the yield could be achieved, but actually given the quality and their expectations of the same it turns out that farmers’ non-adoption of this input is a rational choice.
Prof. David Bevan (Oxford University) then delivered the third and final presentation of the day on joint work with Prof. Chris Adam (IGC Tanzania Lead Academic and Oxford University). The core of the paper concerns a general equilibrium model initially developed by the International Monetary Fund to analyse debt sustainability in a dynamic context rather than the more static approach of traditional debt sustainability analyses. The model has been extended to take account of tax distortions, maintenance and operations expenditure and incomplete appropriability of public capital investment returns. It is calibrated to Uganda and draws on inputs from a wide variety of sources.
The results of the model were at an early stage and expressed in graph form, but some striking results stand out. Especially, inefficiency in public investment that results in less than a dollar’s worth of capital for a dollar invested is a major issue that lowers long term outcomes significantly. Compared with no such inefficiency, a 20% level of inefficiency lowers GDP by about one third over a thirty year time horizon. The results also showed that a very large increase in tax take would be necessary to fund investment plans, suggesting in practice that increased external borrowing will be necessary to finance current spending plans. The next steps will be to iron out the last kinks of the model. The authorities will then be invited to give their views on desired modelling scenarios before final simulations are run.
By Tim Ohlenburg, Country Economist, IGC Uganda
Day 3: Research Session - Political Economy, Accountability and Governance
The session was hosted by Professor Eliana La Ferrara (Bocconi University). In the first part of the session, the presenters elaborated new ways of fostering political engagement to find a way around clientilistic politics. The second part of the session took a different approach to the field by looking at the role of capital cities in civil conflict and regime change.
Prof. Leonard Wantchekon (Princeton University) discussed his work on reducing clientelism. Especially in low and middle income countries, clientelism is a destructive political dynamic that can lead to entrenched corruption. The role of power brokers is important in this as these brokers mobilise support and invest to get a candidate elected, but they then often demand a payback that is ultimately sourced from public resources.
In terms of election campaign approaches, clientelistic platforms essentially promise rewards in return for votes. These create reciprocity between politicians and voters, and they tend to be effective in achieving strong election results. Programmatic platforms where normative policy issues are discussed, on the other hand, can generate communication between voters and with voters and the candidate, but they’re not that useful in winning elections.
The paper is about two experiments that support a programmatic election approach. The first experiment was conducted in the Philippines. It only cost about $5,000 and the intervention was to organise town hall meetings where political programmes were discussed. These had a positive effect on both turnout and electoral support for candidates receiving the treatment. The second experiment was conducted in 90-120 minute meetings, without the candidates, in treatment villages. The control was again a business-as-usual campaigns. The aim was to isolate the effect of programmatic versus clientelistic campaigns.
The effects observed were several. Treatment raised election turnout, but not that much in aggregate. More significant was the impact on vote shares. In the Philippines parties gained about 2%, enough to get them into parliament. Importantly it was shown that the programmatic approach was as effective as the clientilistic one, but at a much lower cost. In sum, programmatic approaches alone don’t work, there needs to be dissemination. Deliberative campaigns are effective in boosting the success of programmatic platforms.
Rachel Glennerster (Director, IPA and IGC Sierra Leone Lead Academic) presented a complementary piece of research that focuses on improving the interaction between voters and candidates. The question was whether debates affect voting behaviour. While journalistic accounts suggest that they do, there has often been cynicism in the academic community due to the belief that clientilism limits any impact of such debates.
A local NGO, Common Ground, hosted and filmed debates between parliamentary candidates with a stardardised structure with various questions on politician background, policy goals and the like. These videos were shown to participants as it was not possible to hold similar debates in several places. There were treatment and control polling stations.
The results included that voters learned a lot about the candidates and also the political system and their rights as citizens. Seeing the debates increased voter knowledge along several dimensions, changed results to those politicians with better policies and increased voting across ethnic lines. Voters then chose candidates more attuned to their own policy preferences and politicians got 5% more votes if they won a debate.
The third and final presentation of the day was by Filipe Campante (Harvard Kennedy School) who sought to answer the question: why don’t politicians steal the entire budget they’re entrusted with? Constraints probably include elections, pressure from parliament, possible legal action and the media.
Even in superficially unconstrained government contexts, the risk of civil conflict and popular pressure leading to a change in government is present. In such civil strife, capital cities play the pivotal role. Recent events in Ukraine and Bangkok suggest that even elected governments may be affected by large scale demonstrations in the capital.
The project looked at the remoteness of capitals and effects of shifting capitals in a cross country setting. The data heavily draws on PIRIO-GRID data and includes controls such as luminosity, terrain and climate. Predictions were that A) conflict is more likely to emerge close to the capital as it’s cheaper to buy off those far away, B) conflict close to the capital is more likely to topple incumbent governments and C) isolated capitals are associated with mis-governance. In sum, it was thought a priori that isolation of capitals is associated with less accountability and worse governance.
Running the numbers, the first result is that these effects can generally be shown, but only in autocratic regimes. Democratic countries, by contrast, appear largely unresponsive to these effects. In terms of conflict prevalence, civil strife becomes more likely if the capital is moved closer. Related to this, regime change is more likely if conflict occurs close to the capital and regime change also becomes more likely if the capital is moved closer to areas of conflict. Overall, it is indeed the case that isolated capitals are associated with worse governance in autocracies. A general though emerging from this is that the spatial distribution of the population is important for understanding governance and institutions. A hypothesised reason is that information transmission functions better in densely populated areas.
By Tim Ohlenburg, Country Economist, IGC Uganda
Day 3: Research Session - Agriculture
Professor Kelsey Jack opened the session with, ‘Seasonal liquidity constraints and agricultural productivity: Evidence from Zambia’, which used a randomisation design to study how loaning maize to rural Zambian households affected consumption during Zambia’s hungry season, and found strong effects on consumption smoothing.
Next, Professor Jeremy Magruder, who has been working with Malawi’s Ministry of Agriculture and Food Security, presented his research using network theory to inform the design of agricultural extension programmes, with the intention of increasing the spread of knowledge through trainee farmers’ social networks.
The precise training used by Professor Magruder’s team encouraged Malawian farmers to use ridged fields, which improve rainfall collection and reduce fertilizer runoff. In control villages, village chiefs selected farmers to be trained in ridging- and often selecting farmers who were not well-connected to other farmers in the village social network. In the first set of treatment villages, the researchers instead selected for training the two farmers with the most social network connections to other farmers in the village; in the second set of treatment villages, training was provided to two farmers living in the densest part of the village.
This design reflected “threshold diffusion theory”, which states that people (in this case, farmers) adopt a new technology when enough (N) of their contacts have adopted that same technology. The theory can be interpreted as recommending prioritising the training of farmers with the most connections to other farmers, to optimise diffusion.
The study’s results found that, indeed, diffusion depended on the social connectivity of the trainee farmer (and, less so on the population density of the area around their house).
Finally, Lorenzo Casaburi presented experimental evidence from Kenya, regarding possible improvements to agricultural insurance models. Despite exposure to large, and harmful, risks, smallholder farmers around the world generally show low demand for insurance; to remedy this, he suggested, insurance products should be better aligned with farmers’ low liquidity, the seasonal variation in their need for expenditure, their present bias, and their low trust in insurers.
His research trialled three insurance models: In the first, farmers were offered insurance for an upfront payment at a fair (zero expected profit) price. In the second, farmers were offered insurance for an upfront payment at only 70% this fair price (a 30% discount). In treatments three and four, farmers were offered insurance ‘on credit’, their insurance payment being deducted from their final harvest revenues (group four was offered an additional cash payment equal to the discount paid to group 2). The first two (‘upfront payment’) treatments saw 13% and 33% take-up respectively; by dramatic contrast, the final (‘deferred payment’) groups saw 76% and 88% takeups.
To take these findings into policy, contract enforcement, and proper savings mechanisms for insurers, were recommended.
By Sally Murray, Country Economist, IGC Rwanda and Anne Laski, Country Economist, IGC Tanzania
Day 3: Research Session - Large Firms
The session was chaired by Professor Chris Woodruff (University of Warwick) and three people presented.
- The first presentation was entitled “ICT and Value Chain Coordination: Evidence from Kenya” by Dr Lorenzo Casaburi (Postdoctoral Fellow, SIEPR, Stanford University)
- The second presentation was by Professor Oriana Bandiera (Professor of Economics, LSE) and was entitled “Managing the Family Firm: Evidence from CEOs at work”
- Finally, Tarek Ghani (University of California, Berkeley) presented on “Competing for Relationships: Markets and Informal Institutions in Sierra Leone”
Day 3: Framework Session - The Gains from Trade
Chaired by Erik Verhoogen (Research Programme Director, IGC Firms Programme; Associate Professor of International and Public Affairs and Economics, Columbia University) and Richard Newfarmer (Country Director, IGC Rwanda, South Sudan and Uganda) , this Framework Session aimed to lay out the research landscape on Trade Gains.
Andrés Rodriguez-Clare started the session outlining the three most pressing questions in the field of Trade and Growth:
- Does trade openness increase growth?
- Under which conditions does trade fosters growth, and how can these gains be measured?
- And finally, what is the role of public policies?
As a matter of fact, much still needs to be learnt about the impact of trade on growth. For example, trade seems to be correlated with growth, and this evidence is stronger in countries that have adopted open market policies. Recent empirical work has identified the causal relationship as to be going from trade to growth, but the former seems also to be correlated with higher poverty. Hence, there is a strong need for more research into policies to better harness gains from trade.
Moreover, while researchers have managed to clearly identify this causal impact, more work is needed in order to understand the nature of this link. Interesting research has analysed how trade openness allows firms to access better and higher quality inputs, better technologies and how trade provides incentives for learning and production upgrading. How to foster this process, however, is a policy question that still offers many research opportunities.
Central to the debate on Trade Gains are the obstacles that firms face in trading both internationally and domestically. For example, the US gains from internal trade have been estimated in the range of 30%, but this figure would drop to 10% if the US trade costs were comparable to Ethiopia and Nigeria. This issue is particularly relevant in many developing countries as they often record significantly lower trade flows than what economic models would predict. Identifying and tackling the source of these trade barriers could potentially have a large impact in reducing income disparities between countries.
Melise Jaud (World Bank) took the podium next to present her work on export “Big Hits”. This term came to describe those episodes of rapid export surge of products new to a country’s export basket. Trade statistics show many of these episodes around the world, from bananas in Uganda to cut flowers in Kenya, but little is known about the origin of these export successes. Jaud’s results show that Big Hits induce growth in the number of firms, increase employment and stimulate a learning process conducive to future export success. However, little is known about the role that policy can play in the process. As a matter of facts, these episodes are not correlated to demand nor supply shocks and seem to be determined by country-product matching dynamics. How to foster this process is a question on which the research agenda should focus in future.
The two discussants, Hon. Minister Axel Addy (Minister of Commerce and Industry, Liberia) and Rukhsana Shah (Secretary, Ministry of Textile Industry, Government of Pakistan), laid out an interesting debate from their own countries’ experience. Using the words of Andrés Rodriguez-Clare, what is important for policy-makers is not “creating comparative advantage, but it is taking advantage of existing comparative advantage by mobilising resources”, referring, for example, to Human Capital and Infrastructure.
By Andrea Smurra, Country Economist, IGC Myanmar
Day 3: Framework Session - Elite Capture and Political Economy
Professor Gerard Padro i Miquel (Research Programme Director, IGC State Programme and Professor of Economics, LSE) presented the framework session on elite capture and political economy. He began by stating that rich countries tend to have better institutions, but that this correlation does not yield immediate returns – they tend to be long-term investments which suffer from measurement differences across countries. Even the concept of “good institutions” is malleable e.g. the autocracy vs democracy debate.
Padro chose to frame the debate by mapping two aspects of the policy determination process: accountability and aggregation of preferences. The issue of accountability, between politicians and citizens as a whole, is the traditional focus of research into governance failures. He looked into three accountability failures: information asymmetries, procedural flaws (such as rigged elections) and clientelism. He then went on to look at the issue of aggregation, highlighting two failures: ethnic politics and a lack of definition of individual preferences.
This framework was then used to analyse the issue of elite capture. He looked at two main types of elites: political elites (who control political power) and economic elites (who capture rents/industries). These two intermix in practice but normally fall under Padro’s two categories above. Political elites normally fall under accountability – wanting to stay in power and building clientelist structures and controlling the media to do so. Economic elites control preferences – their interests are disproportionately considered by those in political power which encourages friendly regulation/labour relations.
Padro finished his talk by focusing on the negative implications of elite capture. At the local level, there are distributional problems, while at the country level, there are barriers to entry in the political and economic markets which can constrain growth. So, what can outside actors do about this? Donors tend to avoid the issue by focusing on non-controversial issues such as service delivery of education and health. They also favour traditionally “good” policies such as trade openness, but these policies can help entrench the power of elites.
The session chair, Professor Eric Werker (Country Director, IGC Liberia and Associate Professor, Harvard Business School) then provided some comments. He presented work with Lant Pritchett (2012) which looked at four types of economic interests: magicians, rentiers, workhorses and powerbrokers, all of whom operate within different markets with different interests. He interestingly focused on firms who have political access and will therefore favour individual deals over far-reaching reform (which will restrict their own interests).
Finally, there were a number of interesting comments from the discussant, Nicholas Waddell (Governance Adviser, Growth Team, DFID). He particularly focused on how a donor could operate within this environment while encouraging elites to relax their capture and align their interests with the interests of the country as a whole.
The session was then opened to the floor with a prevailing focus on the interest of developed countries in maintaining the status quo, and a challenge to the IGC to tackle more of these complex issues.
By Helen Sims, Communications Coordinator, IGC London Hub
Day 3: Country Session - India-Central
Chaired by Montek Singh Ahluwalia (former Deputy Chairman, Planning Commission of India), the session focused on infrastructure provision.
Oliver Vanden Eynde (Paris School of Economics) presented his research on connecting rural India. The project involves construction of an integrated, geocoded dataset of all infrastructure projects in India, with a focus on those under ‘Bharat Nirman’ – a flagship infrastructure programme of the government. It seeks to analyse two key issues: (i) factors determining successful programme completion, particularly in conflict areas, and (ii) impact of rural infrastructure provision on local socio-economic and political outcomes. It finds evidence of particular implementation difficulties in conflict areas, with varying patterns across different infrastructure types. Lack of coordination across projects is also visible.
Ashish Vachhani (Ministry of Finance) gave an overview of the new government’s priorities for infrastructure and related regulatory issues. Over 2012-2017, the aim is to build world-class infrastructure, involving investment of US$1 trillion. This will have important spinoffs for manufacturing and employment growth. Infrastructure has been traditionally provided by the government due to natural monopolies and public interest, but this has led to operational inefficiency, quality concerns and inadequate investment. The opening up of telecoms in 1991 marked a change. There is now consensus that government regulation plays an important role and there is optimism regarding policy agreement for regulation in railways, highways and real estate.
Rathin Roy (National Institute of Public Finance and Policy) said that a binding constraint on growth in India is the ramshackle infrastructure. Addressing this requires money; there are three layers of challenges: (i) poor productivity of investment in India; (ii) declining government contribution in infrastructure financing, implying greater reliance on commercial banks. This strategy is difficult to sustain and hence, there is a need to bring in foreign investment. There are constraints in terms of a capricious, ill-suited regulatory framework and bias of the financial system against long-term finance for emerging economies; (iii) savings from developing countries are increasingly being invested in the developed world.
Nuno Gil (University of Manchester) highlighted the complexities of mega infrastructure projects, which involve vast networks of public and private actors. There are delays, cost overruns and evolution of the initial scope and targets. This leads to slippages in performance expectations and it is no different in India. Some additional challenges in India include premature announcement of hard targets, centralised governance, resource scarcity, tension between lender conditions and evolving nature of mega projects, and a lack of trust. Projects end up being successful for some actors, leaving some others disappointed. There is a need for a more inclusive goal to unify parties, decentralised governance structures and flexible institutions.
By Nalini Gulati, Country Economist, IGC India-Central
Day 3: Country Session - The Economic Implications of Ebola
The Economics Implications of Ebola was opened by Herbert M’cleod (IGC-Sierra Leone Country Director) who outlined the transmission mechanisms and social impacts of Ebola in Sierra Leone. His presentation explained large impacts on tourism and hotel sectors, slowdowns in regional and broader international trade and investment flows, and the long-run effects on revenues and public budgeting. He ended with a call for optimism and increased efforts towards data collection, as well as a comprehensive rescue package.
He was followed by the Honourable Minister Axel Addy (Minister of Commerce and Industry in Liberia) who spoke on The Potential Impact of the Ebola Outbreak on the Liberian Economy and Government’s Planned Policy Interventions. He emphasised the key issues of the speed of transmission, particularly relative to response efforts, the impact on agricultural production and commodity prices, and the slowdown in key export and services sectors. The current projection for macroeconomic loss is $359 million. Complicating the situation is Liberia’s dual currency regime, and the inflation pressure in critical import transactions. Government responses include mandatory leave for nonessential public employees and the establishment of a $5 million trust fund, which will be allocated towards community based intervention, health centres, and ensuring nutrition for ebola’s victims. The post-Ebola recovery strategy includes plans to rehabilitate hydro-power, cash-for-work programmes, and conditional cash transfer programmes for affected households.
Rachel Glennerster, (Lead Academic in IGC-Sierra Leone) presented on ebola’s microeconomic impacts in Sierra Leone, emphasising effects on income and food security, as well as the additional effect of the region’s hungry-, or rainy season. She highlighted the impact of essential restrictions on social activities on economic output. An existing IGC project monitoring food prices and traded has allowed the IGC Sierra Leone team to find that imported rice in August and September has not changed dramatically from previous years. They found somewhat lower prices for domestic rice across cordoned districts in Sierra Leone, suggesting the possibility that food aid could be crowding domestic markets. She concluded by suggesting that the government should identify and target areas displaying price spikes and delivering food aid accordingly.
The panel concluded with a presentation by Dr. Jonas Hjort (Lead Academic for IGC-Liberia) which described responses from a phone based survey on business activities in Monrovia, Lofa, Margibi, Bomi, and Bong, compared to activities in less affected counties and compared to activities in the previous year. They found that 8% of the sample firms had gone out of business, although no causation can be interpreted at this time. The analysis found negative estimated effects on the automotive and construction sectors in Monrovia for both male and female full and part-time labour, while sales and construction saw losses of $23,000 and $44,000, respectively in Monrovia (compared to 2012 figures).
By Anne Laski, Country Economist, IGC Tanzania
Day 3: Country Session - Myanmar
The Myanmar country session included a wide-ranging discussion on the Myanmar garment sector, natural resource development, trade and banking sectors and civil service reforms. Professor Rocco MacChiavello chaired the session, and country economists Mari Oye and Andrea Smurra gave background presentations on opportunities for future research, while Dr Tin Htoo Naing of CEES Myanmar covered reforms in the Myanmar garment sector.
Garment is historically often the first sector where countries learn how to manage and run large firms, MacChiavello said. Researcher Rory Creedon also demonstrated a working tool for managing garment import-export data which IGC is now using in a joint project with the Myanmar Garment Manufacturers Association.
The second area of the presentation focused on natural resources. Myanmar has a wealth of resources including oil and gas, jade, timber, and hydropower potential – how the revenues from these will be collected, managed, and divided with subnational governments presents a crucial area for Myanmar’s sustainable development.
Finally, Andrea Smurra covered trade policies and banking sector reforms. Fixing policies in loosening interest rate regulation and the requirement of 100% collateral on loans could offer an avenue to increasing growth.
Myanmar policy stakeholders in the discussion included Dr Tin Maung Than, Director at the Myanmar Development Resource Institute, and Daw Khin Lay Myint, Deputy Director General of the Myanmar budget department.
By Mari Oye, Country Economist, IGC Myanmar
Day 3: Country Session - Bangladesh
The Bangladesh country session was chaired by Dr. Sultan Hafeez Rahman (Country Director, IGC Bangladesh).
Pinar Keskin (Assistant Professor, Wellesley College) presentation on “Water Quality Awareness and Infant Health: The Role of Breastfeeding” is based on a study which investigates if mothers increase duration of breastfeeding in response to concerns about water quality (arsenic was found in tube wells in 1990). The paper compares children born before and after 2002 and finds evidence of increased breastfeeding – more months and more likely to be exclusive for the youngest children. The response is strongest for women who would have found it harder to switch to uncontaminated wells which suggests behavioral response. The authors conclude that the arsenic contamination information campaign in Bangladesh has led to a possible behavioural response to concerns about water quality.
Chris Woodruff (Professor of Economics, University of Warwick) presentation on “Managerial Capital and Productivity: Evidence from a Training Program in the Bangladeshi Garment Sector” is based on a research project which is investigating the huge gender imbalance in manager roles in the ready-made garment (RMG) sector in Bangladesh and if this imbalance hamper productivity and worker well-being. The RMG sector employs 4 million workers, 80% of whom are women. However women make up only 5-10 percent of the sewing section supervisors – and probably a lower percentage at higher management levels. The authors implemented a 6 week training program designed to train sewing machine operators to be line supervisors in the woven / light knit segments of the RMG sector. After the training, 85% of male and 56% of female trainees were promoted 10 months later. The analysis also shows that female trainees perform better in management simulations while their male counterparts perform slightly better in some aspects of productivity. Comments were received on the entrenched gender roles in the Bangladeshi community and it may possible to overcome such barriers through skills training only.
Comments were received that latrines adoption should also be encouraged not only for health and sanitation reasons but also due to potential threat to safety and security associated with open defecation especially for womenfolk. In addition greater mobilization of community level for latrine adoption can be done through rights based approach whereby open defecation is recognized to be uncomplimentary to one’s dignity and self-esteem. Information campaign on the direct health benefits from hygienic latrine could also enhance adoption.
By Farria Naeem, Country Economist, IGC Bangladesh