South Asia Growth Conference 2014

The 3rd Annual South Asia Growth Conference was held in Lahore, Pakistan from 17 – 19 March 2014.

To see live Twitter updates from the conference, head to the Twitter hashtag #SAsiaGrowth, and take a look at our page: @The_IGC.

The final agenda and summaries from the conference sessions are available below. Presentations and videos are available below.


Opening and Keynote

The 3rd Annual IGC South Asia Growth Conference was organized in Lahore by IGC Pakistan in collaboration with the Government of Punjab, Pakistan. The official opening ceremony was kicked off by Adnan Khan, Research Director, IGC, who mentioned that in the last few years Economics as a discipline has been moving towards determining causal relationships, which can then be fed into the policymaking process, and that the IGC is aiding this very process.

Mr. Ahsan Iqbal, Federal Minister for Planning, Development and Reforms, Government of Pakistan, delivered the keynote address. He said that IGC’s work fits in well with the work of the Planning Commission, which promotes evidence-based policymaking. He added that South Asia as a region exhibits acute socio-economic imbalances, and despite having middle-income country economic indicators, the region’s social indicators still resemble those of least developed countries. He described the government’s Vision 2020, which focuses on improving the social and human development indicators of the country. He also emphasized the need for a greater regional dialogue, especially that between India and Pakistan.

Dr. Jonathan Leape, Executive Director of the IGC, emphasized the need to devise solutions to pressing economic and social problems in a practical way. He named several examples of IGC’s work that demonstrate the organization’s commitment towards this goal. He mentioned the core focus areas of the IGC in its Phase II, which include State Effectiveness, Firm Capabilities, Cities, and Energy.

Dr. Shaibal Gupta, Country Co-Director, IGC India-Bihar, talked about the need for the growth process to be both inclusive and sustainable. He talked about the role that the IGC has played in building state capacity in Bihar. He added that going forward, the organization needed to focus on promoting greater research on inter-regional issues.

Dr. Ijaz Nabi, Country Director, IGC Pakistan, started by saying that ideas generated by the research community do bring change to the policy process, but one needed to be resilient and patient as this was a long process. He mentioned several examples of IGC’s work in Pakistan from among the 70-odd completed projects.

Dr. Asim Khwaja, Lead Academic, IGC Pakistan, said that it was an encouraging trend to see an increasing number of international researchers working on issues related to Pakistan, but in addition, the involvement of local researchers also needed to be promoted.

Dr. Naved Asim was the last speaker for the session, and he re-emphasised that to build a lasting link between research and policymaking, we need a critical mass of people who were committed to a long-term engagement with the process.

By Farria Naeem, Country Economist, IGC Bangladesh

Welcome Address

Dr. Ijaz Nabi made the opening remarks at the welcome address of the 3rd Annual IGC South Asia Growth Conference. He extended a warm welcome to the participants of the conference and acknowledged that hosting the event in Lahore was made possible by the generous logistic and administrative support offered by the Government of Punjab to IGC Pakistan.

Dr Jonathan Leape introduced the International Growth Centre (IGC) as an independent research consortium which aims to promote sustainable growth in developing countries by providing evidence based policy advice based on frontier research. Based at London School of Economics and Political Science and the Oxford University, the IGC is funded by Department for International Development (DFID), UK. The IGC operates country programmes in 14 countries in Africa and South Asia region. In its second phase of operation, beginning last year, the IGC has shaped its research focus in the areas of State Effectiveness, Firm Capabilities, Cities and Energy; these areas have been widely recognized as very pertinent to growth issues in South Asia region as a whole and particularly to those faced in Pakistan.

Professor Asim Khawaja reflected that events like the IGC South Asia Growth Conference 2014 brings together top researchers, experts and policymakers together and it provides an excellent opportunity to explore ways in which evidence based research can be successfully incorporated to growth policy. IGC aims to introduce new ideas and fill the knowledge the gaps through rigorous investigation and for effective and systematic uptake of these evidence based research to policy, close collaboration between researchers and policymakers from the outset is crucial. Professor Benjamin Olken shared the experience of how evidence from evaluation of anti-poverty pilot initiatives through randomised control trials in Pakistan and Indonesia have guided the scale up of the interventions and underscored the success of evidence based research to policy linkage.

Dr. Shaibal Gupta underscored that the very close social and cultural ties amongst the countries in the South Asia region must be tapped to further stimulate economic integration in the region which in turn will boost economic growth of the region.

Mr. Shahbaz Sharif, Honourable Chief Minister of Punjab extended the support of the government to engage in dialogue and work in tandem with researchers to initiate reforms to enhance economic growth and equity. The government of Pakistan has taken a number of initiatives in areas such as agriculture, education, health, manufacturing sector and energy in order to spur efficiency and competitiveness of the economy with the aim to embark on a sustainable and equitable growth trajectory.

By Abhimanyu Gahlaut, Country Economist, IGC India-Bihar

1: State Capabilities - Public Finance

Chaired by Mr. Tariq Bajwa, Chairman, Federal Board of Revenue, the session opened with a presentation by Bejamin Olken (MIT) who shared the findings of the study “Tax Farming Redux: Experimental Evidence on Incentive Pay for Tax Collections in Punjab”. The researchers of this project, in collaboration the Government of Punjab, experimentally allocated collectors in the entire provincial property tax department into three different incentive schemes. They find that incentivized circles showed 8% higher collections than the control, with the increased revenue mainly coming from an expanded tax base. The incentive in the form of providing a bonus proportional to the amount of tax collected was most (15%) effective in increasing revenue. They find that unofficial payments increase for some taxpayers and decreased for others but overall satisfaction level does not change.

The second presentation of the session was made by Mushfiq Mobarak (Yale University) on “Using Social Incentives to Collect Taxes: A Field Experiment with Firms in Bangladesh”. He rigorously examined a pilot programme to test whether simple social recognition based interventions — sending personalized letters to the firms, providing reward cards on payment of taxes– can raise revenues by improving voluntary firm compliance in Dhaka. The preliminary results of his study shows that these interventions are affective in raising revenues though there is huge heterogeneity in the way different types of firms respond to these incentives.

The third and the final presentation of this session was made by Michael Best of LSE. He showed that salaried workers’ income tax liability is under-reported by at least 10% on average. He also showed how underreporting by firms is mainly in response to changes in tax rates at kink points in the tax schedule. He argued that third-party reporting of salary incomes is largely ineffective at reducing tax evasion in developing countries that have very tax-capacity. He also made several policy recommendations that can help government to increase tax revenue. First, the government should crack down on the cases of misreporting by matching the employer-employee data. Second, they should consider increasing tax rate on salaried income but lower the rate for non-salaried income.

The discussants for this session, Rathin Roy, Director, NIPFP and Surajit Bhalla, Oxus Investment, made several useful comments in the end.

By Chinmaya Kumar, Country Economist, IGC India-Bihar

2: Macroeconomics and Foreign Investment

Atif Mian (Princeton University) presented his thoughts on “Pakistan’s long-term growth prospects”. He noted that Pakistan has fallen behind India in terms of growth rate, foreign investment and exports, especially since 1992 and that innovations and structural changes are needed for Pakistan to prosper in the long run. The chair for the session, Arvind Mayaram (Secretary, Dept. of Economic Affairs, Ministry of Finance, Government of India) emphasised the need for political stability to achieve macroeconomic equilibrium.

Ehsan Choudhari (Carleton University) presented his IGC project on “Monetary Policy in Pakistan: The Role of Foreign Exchange and Credit Markets”. The aim of the project is to create a rigorous, yet policy relevant model of monetary policy using the new Keynesian framework. The key results include that, interest rates have a relatively weaker impact on inflation and outputs in Pakistan and that fiscal authorities need adjust taxes and expenditures to control public debt levels.

Ila Patnaik (National Institute of Public Finance and Policy, India) presented her IGC project on “Foreign Investors under stress: Evidence from Indian Firms”. This paper examines whether tail events in the home country trigger off extreme responses by foreign investors and whether foreign investors have a major impact on domestic markets through large movements of funds. The results suggest no clear evidence, as in some cases, foreign investors do exacerbate extreme movements in stock price returns, in other cases potentially stabilising prices. Arvind Mayaram remarked that in India, FII and FDI can flow in opposite directions in the time of crisis, between May-July 2013, a large amount flew out of India through FIIs while FDI grew in the same period.

The panellist for the session, Mr. Hasan Nawaz Tarrar (Federal Secretary, Planning and Development, Pakistan) commented that the issue of human development needs to be addressed as the foremost in the subcontinent, as it is key to achieving inclusive growth. Arvind Virmani (President, Chintan) noted that sustaining a high growth rate is important as accelerating the growth rate and that security, not governance, is a necessary condition to achieving high growth. Ibrahim Stevens (Country Programme Director, IGC) noted that for any economic model to be useful, it must answer policymaker’s concerns and that therefore it is important for economists to speak with policymakers before building models to answer policy-relevant questions.

By Noopur Abhishek, Country Economist, IGC India-Central

3: Social Sector Service Delivery 1

Dr. Shaibal Gupta, Country Co-Director of IGC India Bihar, chaired the 1st panel discussion on Social Sector Service Delivery. The first researcher in session was Maham Farhat from Oxford Policy Management Group who presented the findings of Baseline Survey on the effectiveness of Benazir Income Support Program (BISP). BISP is one of the largest unconditional cash transfers of its kind in South Asia, targeting the poorest 20% of the population. It is being evaluated independently by OPM in an effort to provide rigorous results of the effectiveness of the programme; as well as provide on-going support to policy makers to help improve the programme design. The baseline data collected in 2011 revealed large differences between BISP and non-BISP households: BISP households are poorer, more food insecure and have poorer nutrition and education outcomes. They are also engaged in more vulnerable livelihoods, and are thus exposed to serious household shocks, particularly covariate shocks which can result in extremely damaging coping strategies. The presentation concluded with citing potential impact areas of BISP on reducing household poverty, vulnerability to shocks, women’s empowerment and education outcomes.

The next research presentation was titled “Women political leaders, corruption and learning: Evidence from a large public programme in India” and presented by Dr. Vegard Iversen, Institute for Development Policy and Management, University of Manchester. The research looked at the effectiveness of women sarpanches (head of the Panchayati Raj Institution at the Gram Panchayat level) in the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) scheme in Andhra Pradesh. While there is a large literature showing women to be agents of change focusing on allocation and priorities within households, the existing research is divided over the effectiveness of women political leaders. This study plays an instrumental role in enhancing this debate. Taking advantage of India’s policy of randomly allocating village council headship to women, the study uses household survey data and official social audit data – the latter to highlight how the impacts of women’s leadership may change over time. The main finding from the household survey is that corruption and inefficiency is higher in Gram Panchyat (GP) reserved for females. However, when one incorporates level of experience of the Sarpanch, this adverse effect goes away. When using the panel data to look at changes over time, the study concludes that inexperienced women political leaders perform worse than men during their first year in office. However they completely catch up in the second year and from then onwards perform as well as their male counterparts.

Dr. Gupta, chairing the panel, reflected upon the findings with anecdotal evidence from Bihar. He highlighted that Bihar appears to be a counter example change women sarpanch bring by playing a crucial role in disallowing liquor shops to be opened in the village.

The final study in the discussion was titled “Social Audits and MGNREGA delivery: Lessons from Andhra Pradesh” and presented by Dr. Farzana Afridi, Assistant Professor of Economics, Indian Statistical Institute. Concerns over corruption consistently arise in relation to large public programmes in India. Against this backdrop, community monitoring is perceived as a low-cost and powerful mechanism to bolster transparency and effectiveness. Determinants of successful participatory monitoring include high beneficiary stakes, the ease of comprehension and measurement of effectiveness, and a credible grievance redressal mechanism. Uniquely, the MNREGA Act mandates regular social audits by local stakeholders or Gram Sabhas. AP is the only Indian state to institutionalise social audits of MNREGA projects combining a top-down and grass-roots participation process. The data on complaints from these social audits show that the number of irregularities has increased over time: while labour related irregularities do not change with successive audits, material related irregularities strongly increase. While the audit process may have been effective in detecting irregularities and there is evidence of beneficiary learning, the audits do not deter pilferage and malpractice. The reason is that there is a lack of enforcement and punishment of transgressors.

Dr. Minhaj Mahmud, Head of Research at Institute of Governance Studies and Brac Development Institute spoke about the need for looking forward to the impact from the income support program that will appear once the study is completed. On the study related to the performance of women in political leadership, he suggested that there is a need to look at behavioural factors that influence the initial level of poor delivery but leads to a catch up in a year.

Dr. Bharat Ramaswami from Indian Statistical Institute sought information about accuracy of targeting, scale and composition of spending in households, and any formal mechanism to take inflation into account in the BISP program. In India, cash transfers are hotly debated but there isn’t a scale up so far. The feasibility of how you deliver cash to households is a problem.

Dr. Ashwini Kulkarni from Indian Statistical Institute and Pragati Abhiyan asked why in service delivery of programs where women are GP heads should it make any difference when rest of the context remains the same? What is the sphere of influence of just having one women member in the leadership? She said, it is heartening to know that more women are able to access social programs when there is a women sarpanch. With respect to social audits, the learning is that we need to reformulate the objective of social audit in a narrower way – it acts as a good feedback loop. Social audits may not work in all programs. NREGA is a complex mechanism where it is difficult to pin down who has earned at what point. For programs such as food security, social audits is important. The principal question is how can we really have some kind of penalty on bureaucracy on leakages and non-performance. Insights from this will have policy impacts in shaping social audits in Maharashtra.

Summing up, Dr. Shaibal Gupta said, one should take into consideration the historical factors working behind the techno-managerial aspects. In India, most of the southern states have a history of good governance and social movements that strengthened the community. Social sector service delivery is now making or breaking governments in Hindi heartland. He expressed satisfaction that research presented in the discussion delivered on the objectives.

By Ghanshyam Tiwari, Country Economist, IGC India-Bihar

4: Social Sector Service Delivery 2

This session brought together three studies of social sector service delivery with potentially important consequences for policymakers considering how to select priorities from many competing agendas.

The first, presented by Dr. Jeffrey Hammer of Princeton University, discussed sanitation and health in South Asian slums with a focus on Delhi. Dr. Hammer summarized two findings pithily: “If water enters your house from the street during the year, people in your house, especially infants will get sick a lot,” and “If your neighbours defecate in the open, you and your children will get sick a lot.” Specifically, he highlighted correlations between areas of open defecation and children’s shorter height, and between water entering the home and cases of diarrhoea, including very dangerous recurrent infant illness. This isn’t an individual problem of poverty – instead, the behaviour of one’s neighbours is an externality, and sewers are public goods which the government ought to provide. Hammer advised policymakers to focus on the basics of doing what they can do, and to provide public goods before private goods. In this case, that would mean emphasizing water and sanitation above less-cost effective interventions. There could also be ways to generate accountability for these projects. When early results were shared with the neighbourhood associations in the study areas, the residents said they “knew water came into their houses but they didn’t know it could make them sick,” and then went on to demand better sanitation from their elected representatives.

In the second study, “Coming up short: Recovery gaps in child development and the role of maternal education after the 2005 Pakistan earthquake,” Dr. Tahir Andrabi of Pomona College presented the first academic analysis of the long-term effects of the earthquake. Four years after the quake, he found that the violent trauma from the earthquake had significant, permanent effects on children. Some of these effects hit everyone, but some affected the poor more. This kind of shock can exacerbate “poverty traps”, in which inequality is passed on to the next generation. Dr. Andrabi’s research employed a rigorous method comparing randomly selected villages further from the earthquake’s fault line with those closer to the quake. Despite the high levels of post-quake aid and reconstruction and the recovery of household consumption , Andrabi found persistent dangers that were less visible. The study caught major differences between the height and test scores of children close to the fault line and those further away. Living further away from the fault line was equivalent to getting another teacher in the classroom in terms of test scores. While the height of children who were in utero at the time of the quake was affected for both richer and poorer families, a higher level of maternal education protected children from the “cognitive gap” (lower test scores) their poorer neighbours suffered. The study provides important and sobering work on the long-term effects of shocks on children’s development. Following trauma, immediate disaster aid, no matter how well done, will need supplemental long-term policies to protect children and to prevent the poor from suffering disproportionally.

The third presentation covered Karthik Muralidharan and Nishith Prakash’s work on bicycle distribution to girls in Bihar. The programme works similarly to a conditional cash transfer, but has advantages for intra-household bargaining, as the bicycle is publicly and visibly used by the girl and reduces the effort required to get to school. The program has been very successful – school attendance increased by 30% and exam attendance also rose. As might be expected, the effect was greatest for girls who lived a good cycling distance from school, and for whom the cycles helped the most. To check whether increased school attendance was caused by the new bicycles or by something else, Muralidharan compared Bihar with neighbouring Jharkand and examined the differences in their growth rates with a sophisticated statistical analysis (for more, see the full paper below). The IGC has also published a number of videos on the cycle project, available on YouTube. The policy-relevance of this study reaches beyond the benefits of school attendance alone. Bicycles allow schools to be spaced a little further apart, taking advantage of economies of scale. The programme’s delivery mechanism was remarkably corruption-free. And of course girls’ school attendance has been shown to have many positive benefits. Muralidharan concluded with a quote from American women’s leader Susan B Anthony: “I think the bicycle has done more to emancipate women than anything else in the world.”

By Mari Oye, Country Economist, IGC Myanmar

5: Firms, Trade and Markets

Chaired by Dr Naved Hamid (Resident Director, IGC Pakistan), the session on Firm Capabilities started with Dr Eric Verhoogen (Columbia U) presenting his work on “Technology Adoption among soccer ball manufacturers in Pakistan”. This original project followed the adoption and diffusion of a cost-saving new technology, shedding new light on the barriers to innovation. Evidence shows that not only managers, but also employees might resist the adoption of new technologies, generating the need for pro-innovation incentives and organizational reforms.

Christopher Woodruff (University of Warwick) takes the podium and reviews the evidence on productivity in the garment sector across the world. Surprisingly, substantial differences in productivity exist not only across and within countries, but also between production lines in the same firm. Motivated by this evidence, his most recent research project looked at middle-management’s human capital in Bangladeshi garment sector. With 80% of operators being female, this sector counts only few female supervisors and a training programme was designed to close this gap. As a result, female supervisors were reported to be as efficient as male ones and reduced absenteeism within their teams. Evidence on low promotion rates for female workers, however, shows that this productive organizational change still faces some obstacles.

Our third presenter, Kunal Sen (University of Manchester) extends the debate on firms’ capabilities by looking at financial access in India. While most of the studies on this topic look at the formal sector, Dr. Sen exploited a database of almost 300,000 informal micro enterprises to look at how the lack of finance influences the ability of these family businesses to evolve into more structured and larger businesses. The evidence presented shows that policies aimed at increasing financial access could yield large benefits in terms of poverty reduction and employment by allowing this sector to grow sensibly in terms of businesses’ size and productivity.

Dilip Mookherjee (Boston University) completes the picture by presenting a new approach to microfinance for poor farmers. Traditional microfinance and group based lending (GBL) are characterised by rates of interest and repayment schedules that, in practice, hamper the access by many poor farmers. For this reason, a special lending scheme was designed to meet the needs of this sector and these loans were rolled out with two modalities. The first was a classic GBL while the second used local intermediaries, traders and lender, to recommend individual applicants. The second scheme resulted in substantially higher take-up and repayment rates, as well as increases in productivity, showing that innovative ideas are crucial to ameliorate the financial access constraints and rural poverty.

Mr. Azfar Hasan, CEO of Matrix Sourcing, concludes the session by exploring constraints faced by the Pakistani private sector and future research opportunities. Among the topics discussed we find lack of diversification, sluggish innovation and the importance of trade associations.

By Andrea Smurra, Country Economist, IGC Myanmar

6: Public Sector - Management and Program Design

This session was chaired by Mr Irfan Elahi (Chairman Planning & Development Board, Government of Punjab).

Rema Hanna (Harvard Kennedy School) presented her project titled “Deal with the Devil: The Successes and Limitations of Bureaucratic Reform in India”. The researchers of this project, in collaboration the Government of Karnataka, carried out randomised controlled trial in 322 Public Health Centres in 5 districts of Karnataka to investigate how to monitor and incentivise bureaucrats. They found that monitoring and incentives improve attendance of lower health staff and improve health indicators however other forms of corruption rise.

Imran Rasul (University Collage, London) presented his project titled “Management of Bureaucrats and Public Service Delivery: Evidence from the Nigerian Civil Service”. Exploiting data from the Nigerian Civil Service, the researchers study how the management practices that bureaucrats operate under, correlate to the quantity and quality of public services delivered. They find that giving workers autonomy leads to higher project completion rates (18%) and an increase in montioring and evaluation leads to significantly lower project completion rates (14%). This latter result is because bureaucrats multi-task and incentives are poorly targeted, and because these management practice capture elements of subjective performance evaluation that further leave scope for dysfunctional responses from bureaucrats.

Michael Callen (University of California Los Angeles) presented his project titled “Who you select matters for Public Sector Performance: Experimental Evidence from Pakistan”. Researchers of the project examine the relationship between policymaker personalities, job performance, and response to reforms in Punjab combining: (i) personality tests and measures of integrity within health inspectors and senior health officials and a large and representative sample of doctors; (ii) measures of job performance from unannounced visits to health facilities; (iii) a randomized controlled evaluation of a novel smart phone monitoring technology; (iv) experimental manipulations of the presentation of data on doctor absence to senior health officials. They found that personality positively predicts doctor attendance and negatively predict whether doctors collude with inspectors to falsify reports. They also find that smart phone monitoring has the largest impact on doctors with high public sector motivation and senior health officials with high personality test scores.

Two discussants, Mr. Murad Ali Shah (Advisor to CM Sindh on Finance) and Dr. Prabhat Ghosh (Country Co-Director, IGC India Bihar) apart from incentives to improve performance – how to keep motivation of lower level staff working in the difficult areas of the country is also an important issue. They further said that any operational change in the current bureaucratic system might result in success at the initial stages but can’t be sustainable because bureaucrats will adjust to the new system and rules in a few months and find out ways around the new changes/rules.

They also said that what needs to be done (for sustainable change in current system to achieve better results) is institutional reform by political leaders. Unless political leaders decide to reforms institutions- change won’t happen.

By Vikas Dimble, Country Economist, IGC India-Central

7: Policy Lecture

Dr Ali Cheema moderated a policy lecture focusing on state effectiveness and research. Dr Tim Besley of the LSE, spoke via Skype on state effectiveness, political institutions and the role research can play in policy making.

When studying state effectiveness, Dr Besley argued that political institutions are key because they can constrain power and they play a large role in how people acquire positions of responsibility and power. In economics, researchers see economically effective autocratic regimes and ineffective democracies, and vice versa. What is more important is how governments create the context in which the economy operates. Dr Besley stated that he sees two criteria for effective government: 1) selection and 2) incentives. Selection underscores the fact that we care who holds power. People have different competencies, levels of honesty and purpose. There is a historic trend in many countries of power becoming concentrated in political elites with strong networks. If selection is an important factor in political institutions’ effectiveness, a key issue is how to refresh these networks? Here we see a trend towards quotas in places like India, as well as programmes which support new entrants.

Incentives are key in two ways: determining effective institutional oversight and ensuring broad-based policies. If institutions constrain politicians, they need to create incentives that change the cost-benefit analysis of politicians towards better decisions. This can also be done through a judicial system which enhances the rule of law, and whose independence is rewarded.

Institutions also need to encourage government interest in broad based policies, which put the good of society over benefits to a narrowly defined group. So why do political institutions and state effectiveness matter to economics? Firstly, better political institutions often lead to better policy making, both in cost-benefit analyses and in responses to shocks. Also there are more incentives for better political institutions to invest in state capabilities which are important for building longer run economic improvement. This includes fiscal capacity, infrastructure, collective capacity, and legal capacity such as property rights and effective regulation.

Since political institutions clearly matter to economics, it is important to look at government architecture: how government is structured and how it carves out areas of responsibility. There are several broad dimensions within this topic; firstly, the role of autonomous government institutions, like the central bank, courts and regulators. Here the selection aspect of political institutions is key. Another dimension is the competition between government branches, which sets up incentive structures. Decentralization plays a role in this—creating information on comparative performance between different branches to encourage better performance, allowing the mobility of humans and capital, encouraging innovation, and creating career concerns for politicians.

Finally, the context of political institutions changes their effectiveness—social mores, culture, history, etc. all have an effect. Economists are frequently suspicious of cultural explanations, but when contracts are highly incomplete culture can play a large role in determining outcomes. In government, politicians often have huge amounts of discretion to make decisions on the behalf of their countrymen and very few contractual obligations which constrain or incentivize their choices. Thus, social norms interact with personal incentives and influence policy outcomes.

Subsequently, Dr Cheema opened up the floor to questions. First, Assistant Professor Nazia Malik of NUST asked about how Dr Besley thought incentive structures in the Pakistani government have changed with the decentralization of expenditures to provinces and the continued centralization of tax collection in the central government. She also asked him if he thought that a lack of institutional capacity in some provincial governments would cause them to lag behind other regions. Dr Besley agreed that these are large issues which are applicable to many country contexts. The capacity of the central government is always better than the provincial level, but if money is raised locally it sharpens accountability. These two competing issues need to be weighed, and a system of rules and grants to pass funds down from the central to the provincial level needs to be transparently created.

The second question was from Dr. Zafrullah Chowdhry, founder of Gonoshasthaya Kendra. He asked Dr Besley if he was promoting effective autocratic governments over ineffective democracies, and stated that he felt there was a lack of emphasis on election commissions in the lecture. Dr Besley denied any preference for autocracies, and stated that he feels the debate obscures issues rather than shedding light. More important are the checks and balances which lead to accountability in governments. China may be autocratic, but it has strong accountability mechanisms. He also agreed that elections are important—they chose the ruling class—but election commissions are only part of the government system. Then democracies fail, it is often because there has been too much focus on elections and not enough on creating accountability for the people who gain power.

Dr Shaibal Gupta, co-director of the IGC India-Bihar office, asked about how democracy can co-exist with family oligarchies. Dr Besley pointed out that this is not limited to the developing world, when you look closely at the USA, UK and other established democracies, leaders tend to come from political dynasties. The question is whether it is whether it is damaging. To some extent, Dr Besley feels this question is a sideshow; the issue should be taken seriously but its less of a concern if there are other forms of institutional arrangements which create accountability.

Finally Mari Oye, IGC Country Economist in Myanmar asked Dr Besley to give thoughts to the IGC on the role of research and use of evidence in the contexts of rapid institutional change, rather than countries which may only be seeking to tweak existing policies. Dr Besley said that unless research is able to say something about the mechanisms through which evidence is working, its impossible to project findings to other contexts. The big challenges in political economy right now are mechanisms—the mechanism of political selection, of incentives for policy makers. When researchers understand them, we gain a sense of the relative strength of findings in different contexts. It’s no good to make policy recommendations on highly contingent results; researchers must look for broadly applicable findings in data if they wish to give robust policy advice.

By Kyla Reid, Coordinator, IGC London

8: Policy Panel - Priorities for Country Research in Energy

Moderated by Dr. Naved Hamid, Resident Director IGC Pakistan, the Policy Session focused on the research priorities for South Asian countries in energy outages.

Dr. Robin Burgess, Professor at the London School of Economics, presented the talk “Lightining Up South Asia”. Professor Burgess discussed the importance of raising demand of energy due to the structural changes and the rapid urbanization undergoing in South Asia and the high cost of unmet demand in terms of loss of individual and industrial productivity. Professor Robin Burgess stressed the importance of addressing the economic research to incentivize a more efficient demand side management in the energy market. This new approach follows the need for a more rapid response to the energy outages along with the low government capacity of increasing energy supply. Future research should focus on incentives capable to reduce demand supply at peaks, contrasting the theft of energy and a more efficient energy resources allocation in the agricultural sector.

Mr. Suleman Ghani, Economic Advisor for Pakistan federal governments, discussed the consequences of government delocalization of the generation of energy to the federal states and its impact on efficiency and cost in meeting local energy demand.

Dr Minhaj Mahmud, Head of Research at the BRAC Institute of Governance and Development, presented the Bangladesh energy case and the government challenges in providing affordable energy for almost half of the population. Dr. Mahmud also discussed alternative strategies explored by the Government of Bangladesh in improving energy access, such as a better involvement of private capital through private public partnership.

Dr. Arvind Mayaram, Secretary, Department of Economic Affairs, Ministry of Finance, India, discussed the importance of increasing the energy supply along with an affordable pricing policy for the disadvantaged strata of societies. As well, Dr. Arvind Mayaram stressed the importance of improving governance in state power management through the promotion of efficient and independent regulatory bodies.

Mr. Jahanzeb Khan, Federal Minister for Finance, Government of Pakistan, commented on the necessity of efficient allocation of private capital in supporting infrastructure and energy investments. Mr. Khan also stressed the importance of an efficient and fair regulatory framework to assure equitable pricing policies and productive investments. Finally, the Minister of Finance discussed the importance for Pakistan of depending on a reliable portfolio of energy resources to cope with the high volatility of world energy prices.

By Filippo Sebastio, Country Economist, IGC Bangladesh