This paper surveys the recent literature on the links between public debt and economic growth in advanced economies. We find that theoretical models yield ambiguous results. Whether high levels of public debt have a negative effect on long-run growth is thus an empirical question. While many papers have found a negative correlation between debt and growth, our reading of the empirical literature is that there is no paper that can make a strong case for a causal relationship going from debt to economic growth. We also find that the presence of thresholds and, more in general, of a non-monotone relationship between debt and growth is not robust to small changes in data coverage and empirical techniques. We conclude with a discussion of the challenges involved in measuring and defining public debt and some suggestions for future research which, in our view, should emphasize cross-country heterogeneity.
We provide a simple model for considering the interaction between multiple legal regimes existing simultaneously within a single jurisdiction. We demonstrate that, even when the fundamental relationship between outputs of such regimes is to behave as substitutes for one another, the existence of negative externalities between the enforcement technologies can result in the withdrawal of enforcement efforts. We term this phenomenon legal dissonance – the situation in which legal regimes interact negatively in their production technologies. This reduction in aggregate enforcement efforts can result in high levels of crime and disorder within the pluralistic society. This model is then demonstrated in regard to the post-colonial state of Papua New Guinea where significant negative production externalities are present, enforcement levels are low, and levels of crime and disorder are high. Survey data is introduced to demonstrate that these outcomes are in part attributable to the co-existence of the customary legal regime providing for “payback killing” with the overlaid state regime criminalising the same. Disorder may be the outcome of too much law.
African politics are often said to be dominated by ethnic divides, with the ensuing policies implemented by leaders being based almost exclusively on their ethnic power base. In this paper, we demonstrate that the village of origin of democratically-elected leaders matters for the attribution of development projects in the context of one of the largest Community-Driven Development (CDD) programs in Senegal. After showing that leadership matters, we consider those factors that determine who is elected president (and vice-president) of a Conseil rural, the smallest administrative unit in Senegal. We also consider the link between power in the Conseil rural and that in the Conseil de Concertation et de Gestion (CCG), an assembly coopted by the Conseil rural president that is typical of local institutions set up in the context of CDD programs, and which is responsible for the participative identification of the development projects that constitute the priorities of villagers. Using a unique dataset, we show that ethnicity plays almost no role in determining who becomes president (or vice-president) of a Conseil rural, while party politics, age, political experience, village loyalty, and educational and professional qualifications do. Our findings highlight the crucial importance, in terms of development policy, of the local political institutions that are often reinforced or created alongside CDD programs.
We develop a dynamic discrete choice model of a self-interested and unchecked ruler making decisions regarding the exploitation of a resource-rich country. This dictator makes the recursive choice between either investing domestically to live off the productivity of the country while facing the risk of being ousted, or looting the country’s riches by liquefying the resources and departing. We demonstrate that important parameters determining this choice include the level of resources, liquidity and indebtedness. We find that the dictator’s choice regarding the timing of departure is significantly related to external lending, investment and debt. We then argue that this looting phenomenon provides an explanation for the generation of corrupt economies in resource-rich countries. An empirical analysis of available corruption indices suggests that instability-led looting provides a more fundamental explanation of perceived corruption than do various social and cultural indicators or the economic theory of internal political competition.
Community Driven Development (CDD) programs are an extremely important component of the World Bank’s portfolio in the developing world, representing close to $7 billion in 2003, yet solid empirical evidence on their impact is relatively scarce, especially for Subsaharan Africa. In this paper, we consider the impact on access to basic services, household expenditures and child anthropometrics of the PNIR (Programme National d’Infrastructures Rurales) CDD project in Senegal using a unique multidimensional panel dataset on rural households that we followed over a two-year period. Using a variety of estimation procedures, including instrumental variables, and working at different levels of aggregation, we find no evidence for an impact of the PNIR on household expenditures, but find statistically significant effects of the program on access by villagers to clean water and health services, as well as on two standard measures of child malnutrition. The latter effects are particularly important, quantitatively, for children in poor households. The identification strategy we adopt in order to assess the impact of completed projects on beneficiary welfare highlights the importance of the role played by village chiefs and sub-regional politics in determining which eligible villages receive projects and which villages do not.
We consider essential heterogeneity in the impact of a large-scale Community-Driven Development (CDD) program in Senegal. Essential heterogeneity arises when unobservables determine the idiosyncratic gains from participation in a program, thereby generating correlation between treatment effects and selection. Standard instrumental variables estimates are shown to provide an extremely poor estimate of the impact of the program on child nutrition. Application of the local instrumental variables (LIV) estimator using semi-parametric techniques reveals extensive heterogeneity in the impact of the program, with children living in villages with unobservables that make them more likely to receive a completed project benefitting much more than children in villages whose unobservables induce a low likelihood of receiving a project. These techniques provide a sensible and easily applicable manner of assessing whether the decentralized allocation of projects that is inherent to CDD programs is resulting in those who benefit most from treatment actually receiving it.
The WTO’s predicament is a puzzle. Compared to other international organisations it is a huge success, yet the WTO is widely regarded as suffering from a deep malaise. Exhibit A is the inability to conclude a round of multilateral trade negotiations. The last one came in 1994; the current talks (the Doha Round) are in their ninth year and far from done.1 Exhibit B is that most WTO members have lowered their trade barriers since 1994 – just not in the context of the WTO; they lowered them unilaterally and/or only against privileged partners. This paper strives to identify the fundamental sources of the WTO’s woes. Since accounts of the WTO’s quandary stem largely from the contrast between the GATT’s (oft romanticised) wins in the 20th century and the WTO’s woes in the 21st, the point of departure must be identifi cation of the fundamental sources of the GATT’s successes. Two caveats: - To concentrate on essentials, the reasoning is conducted at a high level of abstraction; details are skipped and generalisations are overly broad. The paper lays particular stress on the distinction between woes whose sources are ‘intrinsic’ (i.e. victim-of-its-own-success arguments) and those that are extrinsic (i.e. the world-has-changed arguments). - The historical narrative gives the false impression of rationality and foresight. The GATT’s evolution was driven by natural selection – many, many things were tried; those that worked were maintained, those that failed were dropped and usually forgotten. I use the vehicle of rationality to highlight the political economy forces governing the ‘natural selection.’ The next section considers the sources of the GATT’s successes. The subsequent section considers the changes that created the WTO’s woes. The fi nal section presents a summary and some concluding remarks.
Global supply chains have transformed the world. They revolutionised development options facing poor nations – now they can join supply chains rather than having to invest decades in building their own. Offshoring of labour-intensive manufacturing stages and the attendant international mobility of technology launched era-defining growth in emerging markets – a change that fosters and is fostered by domestic policy reform. Historic income gaps are narrowing as the North de-industrialises and the South industrialises -- a reversal-of-fortunes that constitutes perhaps the most momentous global economic change in the last 100 years. Global supply chains, however, are themselves rapidly evolving. The change is in part due to their own impact (income and wage convergence) and in part due to rapid technological innovations in communication technology, computer integrated manufacturing, 3D printing, etc. This paper looks at why global supply chains (GSCs) matter, the economics of their unbundling, and their implications for policy. It finishes with a discussion of factors affecting the future of global supply chains. The paper begins by putting global supply chains into historical perspective.
