Expert panel discussion: South Asia

Dr Gilles Duranton (Wharton, University of Pennsylvania) presented its research on the misallocation of factors of production in India. The research aims to document the misallocation of factors in India and understand the determinants and the policy implications. This paper quantifies the misallocation of manufacturing output and factors of production between establishments across Indian districts during 1989–2010. It first distils a number of stylized facts about misallocation in India, and demonstrates the validity of misallocation metrics by connecting them to regulatory changes in India that affected real property. With this background, the study next quantifies the implications and determinants of factor and output misallocation. Although more productive establishments in India tend to produce more output, factors of production are grossly misallocated. A better allocation of output and factors of production is associated with greater output per worker. Misallocation of land plays a particularly important role in these challenges.

Professor Mushfiq Mobaraq (Yale University) presented his research on improving sanitation in Bangladesh. This research was conducted in relatively dense rural areas of Tanore district in northwest Bangladesh, the poorest region of the country. Although sanitation coverage has increased dramatically in rural Bangladesh in recent decades, progress in Tanore has been slower. Prior to the start of the study, 31 percent of households reported that they either lacked a latrine or used an unimproved latrine. Only 50 percent had regular access to an improved sanitation facility, defined as a toilet or latrine that separates human excreta from human contact.

The study, covering more than 18,000 households in 380 neighborhoods, aimed to systematically investigate these alternative hypotheses. In order to make sure that the results were in no way contaminated by pre-existing differences among the neighborhoods, a lottery was employed to assign different interventions to different neighborhoods. Some neighborhoods got a version of the highly touted Community Led Total Sanitation (CLTS) campaign, where, over two days, the community participated in graphic demonstrations of how diseases travel from the feces left in the field to their bodies, along with extended harangues and appeals to their better nature. Another randomly chosen set of neighborhoods got help with supply. Latrine supply agents were appointed to provide assistance with the installation and maintenance of toilets. Both these interventions failed comprehensively: at the end of the study period people in these neighborhoods showed no more interest in toilets than their counterparts in neighborhoods where absolutely was nothing done. On the other hand, there was a very substantial increase in toilet construction and a correspondingly large reduction in open defecation, in those (randomly chosen) localities where the demand generation campaign was combined with a discount of 75% on the cost of installing a toilet, with the subsidy targeted only to the landless poor in the community.

Dr Ijaz Nabi (IGC Pakistan) highlighted the role that urbanisation is taking in shaping economic growth in South Asia. The presenter explored the significance of urbanisation, hubs, competitive exports, and dynamic cities as drivers of economic growth and what this could mean for South Asia’s development. Dr. Nabi also stressed that for Pakistan to achieve a sustain growth path, their cities country will likely have to undergo rapid urbanisation. This will require better infrastructure to support not only commercially critical operations, such as air freight, roads, and telecommunications, but populations in low-income urban settlements that lack basic household sanitation and energy sources.

Dr Taibur Rahman (Ministry of Planning) presented the case of urbanisation in Bangladesh. The presenter highlighted the role of Dhaka city as Primate City, as the urban area in Bangladesh that has been growing the most. In the last 20 years, Dhaka has been attracting most of the rural-urban and urban-urban internal migration in Bangladesh. While other cities have been struggling to achieve the same economic growth, Bangladesh alone contributes to 15% of the GDP, gathering in its boundaries 30% of the urban population of Bangladesh. Dr. Rahman also evidenced how this success is been politically induced through the disproportionally large investment that Dhaka has been enjoying compared to the other urban areas of Bangladesh.

By FILIPPO SEBASTIO, Country Economist, IGC Bangladesh