Journal Issue: World Bank Research Observer, Volume 27, Issue 1
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What Can We Learn about the “Resource Curse” from Foreign Aid?
(Oxford University Press on behalf of the World Bank, 2012-02-01) Morrison, Kevin M.
A large body of literature has arisen in economics and political science analyzing the apparent “resource curse”—the tendency of countries with high levels of natural resources to exhibit worse economic and political outcomes. The author examines the purported causal mechanisms underlying this “curse” and shows that they all center on the revenue that these resources generate for the government. As such, it is not surprising that the most recent literature on the topic has demonstrated that, in the hands of a competent government, natural resources have no negative consequences and may actually have positive effects. The important question therefore is: What can be done in countries without effective governments? Policy proposals have centered on (a) taking the resources out of the hands of the government or (b) having the government commit to use the funds in certain ways. Neither of these has been particularly successful, which we might have predicted from research on another important nontax revenue source for developing countries: foreign aid. The close parallels between the foreign aid and “resource curse” literatures are reviewed, as are the lessons from the aid literature. These lessons suggest the need for an important change in approach toward poorly governed resource-rich countries.
Density and Disasters : Economics of Urban Hazard Risk
(Oxford University Press on behalf of the World Bank, 2012-02-01) Deichmann, Uwe; Lall, Somik V.
Today, 370 million people live in cities in earthquake prone areas and 310 million in cities with a high probability of tropical cyclones. By 2050 these numbers are likely to more than double, leading to a greater concentration of hazard risk in many of the world's cities. The authors discuss what sets hazard risk in urban areas apart, summarize estimates of valuation of hazard risk, and discuss implications for individual mitigation and public policy. The main conclusions are that urban agglomeration economies change the cost–benefit calculation of hazard mitigation; that good hazard management is first and foremost good general urban management; and that the public sector must perform better in promoting market-based risk reduction by generating and disseminating credible information on hazard risk in cities.
Mashup Indices of Development
(Oxford University Press on behalf of the World Bank, 2012-02-01) Ravallion, Martin
Countries are increasingly being ranked by some new “mashup index of development,” defined as a composite index for which existing theory and practice provides little or no guidance for its design. Thus the index has an unusually large number of moving parts, which the producer is essentially free to set. The parsimony of these indices is often appealing—collapsing multiple dimensions into just one, yielding seemingly unambiguous country rankings, and possibly reducing concerns about measurement errors in the component series. But the meaning, interpretation, and robustness of these indices and their implied country rankings are often unclear. If they are to be properly understood and used, more attention needs to be given to their conceptual foundations, the tradeoffs they embody, the contextual factors relevant to country performance, and the sensitivity of the implied rankings to the changing of the data and weights. In short, clearer warning signs are needed for users. But even then, nagging doubts remain about the value-added of mashup indices, and their policy relevance, relative to the “dashboard” alternative of monitoring the components separately. Future progress in devising useful new composite indices of development will require that theory catches up with measurement practice.
Coping with Crises : Policies to Protect Employment and Earnings
(Oxford University Press on behalf of the World Bank, 2012-02-01) Paci, Pierella; Revenga, Ana; Rijkers, Bob
The continuing failure of many countries to adequately mitigate the adverse labor market impacts of economic downturns is of concern, since labor market volatility can exacerbate poverty and stunt growth. This article aims to identify potentially effective policies responses to crises by navigating the potential tradeoffs between offsetting adverse short-term impacts of economic downturns on the quantity and quality of jobs, and preserving incentives for economic recovery. The authors propose a taxonomy that categorizes interventions depending on whether they mitigate the negative short-term impact of crises or whether they stimulate recovery. The taxonomy helps policymakers to identify “win–win” policies that avoid potential tradeoffs between these objectives by simultaneously serving both. Common elements of effective interventions are feasibility, flexibility (for example the capacity for scaling up and down), and incentive compatibility—and there is no substitute for being prepared. Having sound safety nets in place before a crisis is superior to haphazardly implementing responses after a crisis hits.
Impact Analysis of Rural Electrification Projects in Sub-Saharan Africa
(Oxford University Press on behalf of the World Bank, 2012-02-01) Bernard, Tanguy
The author reviews trends in rural electrification over the past 30 years in Sub-Saharan Africa. In particular, it is shown that motivations for rural electrification programs have evolved significantly over the years, following changes in development paradigms. The author finds, however, that knowledge of the impact of this has only marginally improved: low connection rates and weak productive utilization identified in the 1980s remain true today, and impacts on such dimensions as health, education, or income, though often used to justify projects, are largely undocumented. Indeed impact evaluations are methodologically challenging in the field of infrastructures and have been limited thus far. Nevertheless examples of recent or ongoing impact evaluations of rural electrification programs offer promising avenues for identifying both the effect of electricity per se and the relative effectiveness of approaches to promoting it.