Devarajan, Shantayanan

Person:
Devarajan, Shantayanan

Development Economics

Author Name Variants

Devarajan, Shantayanan, Devarajan, Shanta, Devarajan, S.

Fields of Specialization

Public economics, Trade policy, Natural resources and the environment, General equilibrium modeling

ORCID

0000-0002-7785-1810

External Links

Blog

Departments

Development Economics

Last updated:July 11, 2023

Biography

Shanta Devarajan is the Senior Director for Development Economics (DEC) at the World Bank. Previously, he was the Chief Economist of the World Bank’s Middle East and North Africa Region. Since joining the World Bank in 1991, he has been a Principal Economist and Research Manager for Public Economics in the Development Research Group, and the Chief Economist of the Human Development Network, the South Asia Region and Africa Region. He was a director of the World Development Report 2004, Making Services Work for Poor People. Before 1991, he was on the faculty of Harvard University’s John F. Kennedy School of Government. A member of the Overseas Development Institute’s Board of Trustees, and the author or co-author of more than 100 publications, Mr. Devarajan’s research covers public economics, trade policy, natural resources and the environment, and general equilibrium modeling of developing countries. Born in Sri Lanka, Mr. Devarajan received his B.A. in mathematics from Princeton University and his Ph.D. in economics from the University of California, Berkeley. Shanta's latest blog posts can be found on his blog, Future Development. Please check out the Development Economics page for more info.

URI

https://hdl.handle.net/10986/38926

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Publication Search Results

Now showing1 - 10 of 46

Trade Elasticities in Aggregate Models: Estimates for 191 Countries
(World Bank, Washington, DC, 2023-07-11) Devarajan, Shantayanan; Robinson, Sherman; Go, Delfin Sia
Armington’s insight that imports and domestically produced goods were imperfect substitutes has unleashed extensive estimates of the associated trade elasticity, primarily for developed countries. This notion of product differentiation, which extends symmetrically to exports and domestic goods, has underpinned trade-focused, computable general equilibrium models of developing countries, including the aggregate, compact version, the 1–2–3 model. Noting that estimates of trade elasticities for developing countries are few, this paper remedies the situation. Using the vector error correction model as the primary method and controlling for global trends and other factors, the analysis derives the long-run elasticity estimates for 191 countries, ranging from China (population of 1.4 billion) to Tuvalu (11,200), including 45 of 48 Sub-Saharan African countries and understudied countries such as Benin, the Republic of Congo, Niger, Fiji, Haiti, Kiribati, and Tajikistan. Import and export elasticities of high-income countries average about 1.4, reflecting the greater diversity of their economies; developing countries’ elasticities average around 0.7 for imports and 0.6 for exports. Elasticities generally rise with per capita income. That the elasticity is greater than one for developed and less for developing countries implies asymmetric responses to shocks, which conforms to intuition and corroborates the analytical results from the 1–2–3 model.
Taxation, Accountability, and Cash Transfers: Breaking the Resource Curse
(World Bank, Washington, DC, 2021-12) Do, Quy-Toan; Devarajan, Shantayanan
Why is governance in resource-rich countries so poor This paper argues that it is because governments in these countries do not rely on taxation, which is an important instrument for citizens to hold their governments accountable. Using a game-theoretic model, the authors show that the combination of low taxes and weak governance can be an equilibrium in an economy with sizeable mineral revenues. As income from natural resources ultimately declines, replacing it with tax revenues may require governments to give control of these proceeds to citizens, in the form of cash transfers say, as a credible commitment to accountability, thereby breaking the country out of its resource curse.
Lifting Economic Sanctions on Iran: Global Effects and Strategic Responses
(World Bank, Washington, DC, 2016-02) Lakatos, Csilla; Ianchovichina, Elena; Devarajan, Shantayanan
This paper uses a global general equilibrium simulation model to quantify the effects of lifting economic sanctions on Iran with and without strategic responses. Iran benefits the most, with average per capita welfare gains ranging from close to 3 percent, in the case when Iran's crude oil exports to the European Union recover to half their pre-embargo level, to 6.5 percent, in the best case of complete recovery of oil exports to the European Union, successful domestic reforms that enable a strong supply response, and increased market access for Iranian exports in developed markets. Iran could achieve benefits close to the upper range if Gulf Cooperation Council oil exporters limit their crude oil exports to support the oil price. If they do nothing, however, the price of oil will decline by 13 percent in the case of complete recovery of oil exports to the European Union, leaving net oil importers better off and net oil exporters worse off.
MENA Quarterly Economic Brief, July 2015: Economic Implications of Lifting Sanctions on Iran
(World Bank, Washington, DC, 2015-07) Devarajan, Shanta; Mottaghi, Lili
Iran and the Permanent Members of the UN Security Council and Germany (P5+1) reached a deal on July 14, 2015 that limits Iranian nuclear activity in return for lifting all international sanctions that were placed on Iran (Box 1). This issue of the MENA Quarterly Economic Brief (QEB) traces the economic effects of this development—removing sanctions on Iran—on the world oil market, on Iran’s trading partners, and on the Iranian economy.
Firms' and States' Responses to Laxer Environmental Standards
(World Bank, Washington, DC, 2019-03) Cordella, Tito; Devarajan, Shantayanan
On June 1, 2017, President Trump announced the United States' withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environmental standards affects the behavior of profit-maximizing firms. It finds that a relaxation of emission standards (i) may increase firms' incentives to adopt clean technologies, but not to pollute less; (ii) may negatively affect industry profitability if it is perceived as temporary; and, when this is the case, (iii) the unilateral adoption of stricter standards by large states may increase the expected profitability of every firm.
Middle East and North Africa Economic Monitor, April 2017: The Economics of Post-Conflict Reconstruction in MENA
(Washington, DC: World Bank, 2017-04-17) Devarajan, Shantayanan; Mottaghi, Lili
Plagued by war, violence and low oil prices, economic activity in the Middle East and North Africa (MENA) region remained subdued between 2013 and 2015, but the situation is expected to improve and growth to surge above 3 percent over the forecast period. Though still below potential, the improvement in growth offers hope. We see signs of "green shoots" in some countries in the region, therefore we have upgraded our short-term prospects for MENA from "cautiously pessimistic" to "cautiously optimistic" over the forecast period. The prospects of peace in Syria, Yemen and Libya are one of the keys to resuming growth over the next decade. But realizing that potential depends crucially on how the post-conflict reconstruction is conducted. On the one hand, a well-managed process could help these war-tom countries rebuild their shattered economies and re-integrate their people so that the region as a whole, and possibly the rest of the world, benefits. On the other hand, a badly managed process can risk a recurrence of conflict, continued stagnation and suffering, and perpetual fragility. The economics of postconflict reconstruction, therefore, is critical to the future of MENA's economies.
Middle East and North Africa Economic Monitor, October 2017: Refugee Crisis in MENA, Meeting the Development Challenges
(Washington, D.C.: World Bank, 2017-10-11) Devarajan, Shantayanan; Mottaghi, Lili
The pickup in economic activity in the Middle East and North Africa (MENA) region is expected to continue in 2018 and 2019. MENA's oil exporters and oil importers both are benefitting from improved global growth; increased trade with trading partners in Europe and Asia; more stabilized commodity markets, especially oil; and some reforms undertaken in the region. The World Bank estimates that growth will accelerate to above 3 percent in 2019. Growth, however, remains below potential as crises and conflicts continue to damage output and reduce employment. While MENA has experienced more frequent conflicts than any other part of the world, by its magnitude, the refugee crisis represents something new. The protracted stay of refugees in hosting communities, now in its sixth year, not only has increased the risk to MENA's economic outlook but also has brought refugees' long-term development challenges to the forefront. Meeting these enormous challenges requires collective efforts.
MENA Quarterly Economic Brief, July 2016: Whither Oil Prices?
(Washington, DC: World Bank, 2016-07-28) Devarajan, Shantayanan; Mottaghi, Lili
This issue of the World Bank MENA Quarterly Economic Brief seeks to understand the factors behind the new normal of the oil market to discern the evolution of world oil prices in the future, and their implications for the economies of the Middle East and North Africa (MENA). Our findings show that the oil price crash of 2014 was preceded by a significant increase in the size and frequency of volatility of oil prices. This volatility in turn contributed to the accumulation of oil inventories, attributing to the decline in oil prices. Noting that, historically, oil price slumps have lasted longer than spikes, we suggest that the current situation in the oil market may persist because of the changing behavior of market players, and the fact that overall oil demand is weak and not expected to rebound anytime soon. We expect the world oil market to work through its current oversupply and rebalance in early 2020 at market-clearing prices that are close to the marginal cost of the last producer (US shale oil producers). Oil prices are likely to be in the range of $53 - $60 a barrel and stay there for several years. The new normal for oil prices will prove difficult for MENA oil producers and could end up overhauling the existing social contract.
Traders' Dilemma: Developing Countries' Response to Trade Disputes
(World Bank, Washington, DC, 2018-11) Lakatos, Csilla; Devarajan, Shantayanan; Robinson, Sherman; Go, Delfin S.; Thierfelder, Karen
If trade tensions between the United States and certain trading partners escalate into a full-blown trade war, what should developing countries do? Using a global, general-equilibrium model, this paper first simulates the effects of an increase in U.S. tariffs on imports from all regions to about 30 percent (the average non-Most Favored Nation tariff currently applied to imports from Cuba and the Democratic Republic of Korea) and retaliation in kind by major trading partners—the European Union, China, Mexico, Canada, and Japan. The paper then considers four possible responses by developing countries to this trade war: (i) join the trade war; (ii) do nothing; (iii) pursue regional trade agreements (RTAs) with all regions outside the United States; and (iv) option (iii) and unilaterally liberalize tariffs on imports from the United States. The results show that joining the trade war is the worst option for developing countries (twice as bad as doing nothing), while forming RTAs with non-U.S. regions and liberalizing tariffs on U.S. imports (“turning the other cheek”) is the best. The reason is that a trade war between the United States and its major trading partners creates opportunities for developing countries to increase their exports to these markets. Liberalizing tariffs increases developing countries’ competitiveness, enabling them to capitalize on these opportunities.
MENA Quarterly Economic Brief, January 2016: The Economic Effects of War and Peace
(Washington, DC: World Bank, 2016-02-03) Devarajan, Shantayanan; Mottaghi, Lili
This report estimates economic growth in the Middle East and North Africa (MENA) to fall short of expectations, at 2.6 percent in 2015, below the 2.8 percent predicted in October. Being constrained by war, terrorism and to some extent cheap oil, short term growth prospects in MENA remain “cautiously pessimistic.” Not only have the civil wars caused untold damage to human and physical capital, in Yemen the number of poor people has almost doubled after the war, but they have created one of the biggest forced displacement crises since World War II. The report examines the different ways in which civil wars are affecting the economies of the region, including the important channel of forced displacement. We also explore how economic fortunes will turn around if there is peace. A peace settlement in the war-torn Syria, Iraq, Libya and Yemen could lead to a swift rebound in oil output and exports, allowing them to increase fiscal space, improve current account balances and boost economic growth in the medium term with positive spillovers to the neighboring countries.