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Development Economics

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Lessons from Nigeria

Corrupt, mismanaged, and seemingly hopeless: that’s how the international community viewed Nigeria in the early 2000s. Then Nigeria implemented a sweeping set of economic and political changes and began to reform the unreformable. This book tells the story of how a dedicated and politically committed team of reformers set out to fix a series of broken institutions, and in the process repositioned Nigeria’s economy in ways that helped create a more diversified springboard for steadier long-term growth.

The author, Harvard- and MIT-trained economist Ngozi Okonjo-Iweala, currently Nigeria’s Coordinating Minister for the Economy and Minister of Finance and formerly Managing Director of the World Bank, played a crucial part in her country’s economic reforms. In Nigeria’s Debt Management Office, and later as Minister of Finance, she spearheaded negotiations with the Paris Club that led to the wiping out of $30 billion of Nigeria’s external debt, 60 percent of which was outright cancellation. Reforming the Unreformable offers an insider’s view of those debt negotiations; it also details the fight against corruption and the struggle to implement a series of macroeconomic and structural reforms.

This story of development economics in action, written from the front lines of economic reform in Africa, offers a unique perspective on the complex and uncertain global economic environment.

Mapping Paths to Prosperity

Why do some countries grow and others do not? The authors of The Atlas of Economic Complexity offer readers an explanation based on "Economic Complexity," a measure of a society’s productive knowledge. Prosperous societies are those that have the knowledge to make a larger variety of more complex products. The Atlas of Economic Complexity attempts to measure the amount of productive knowledge countries hold and how they can move to accumulate more of it by making more complex products.

Through the graphical representation of the "Product Space," the authors are able to identify each country's "adjacent possible," or potential new products, making it easier to find paths to economic diversification and growth. In addition, they argue that a country’s economic complexity and its position in the product space are better predictors of economic growth than many other well-known development indicators, including measures of competitiveness, governance, finance, and schooling.

Using innovative visualizations, the book locates each country in the product space, provides complexity and growth potential rankings for 128 countries, and offers individual country pages with detailed information about a country’s current capabilities and its diversification options. The maps and visualizations included in the Atlas can be used to find more viable paths to greater productive knowledge and prosperity.

One lens through which to view global economic interdependence and the spillover of shocks is that of decoupling (and then recoupling). Decoupling between developed and developing countries can be seen in the strong economic performance of China and India relative to that of the United States and Europe in the early 2000s. Recoupling then took place as developing countries sank along with the developed world during the deepening financial crisis of 2008. This volume examines patterns of global economic interdependence and the propagation of shocks in an increasingly integrated world economy.

The contributors discuss such topics as the transmission of exogenous shocks; causes of business cycle synchronicity; the differences between global and regional shocks; the South-South trade relationship and its effect on decoupling; vertical specialization and Mexico’s manufacturing exports; growth prospects in China, the United States, and Europe after the financial crisis; and the evolving role of the U.S. dollar in international monetary architecture.

Contributors
Helge Berger, Rossella Calvi, Yin-Wong Cheung, Gianluca Cubadda, Justino De La Cruz, Filippo di Mauro, Michael Dooley, Eiji Fujii, Linda S. Goldberg, Barbara Guardabascio, Alain Hecq, Hideaki Hirata, Robert B. Koopman, M. Ayhan Kose, Marco J. Lombardi, Steven Lugauer, Nelson C. Mark, Volker Nitsch, Christopher Otrok, Tuomas Antero Peltonen, Gabor Pula, Pierre L. Siklos, Zhi Wang, Shang-Jin Wei, Frank Westermann

This rigorous and comprehensive textbook develops a basic small open economy model and shows how it can be extended to answer many important macroeconomic questions that arise in emerging markets and developing economies, particularly those regarding monetary, fiscal, and exchange rate issues. Eschewing the complex calibrated models on which the field of international finance increasingly relies, the book teaches the reader how to think in terms of simple models and grasp the fundamentals of open economy macroeconomics.

After analyzing the standard intertemporal small open economy model, the book introduces frictions such as imperfect capital markets, intertemporal distortions, and nontradable goods, into the basic model in order to shed light on the economy’s response to different shocks. The book then introduces money into the model to analyze the real effects of monetary and exchange rate policy. It then applies these theoretical tools to a variety of important macroeconomic issues relevant to developing countries (and, in a world of continuing financial crisis, to industrial countries as well), including the use of a nominal interest rate as a main policy instrument, the relative merits of flexible and predetermined exchange rate regimes, and the targeting of “real anchors.” Finally, the book analyzes in detail specific topics such as inflation stabilization, “dollarization,” balance of payments crises, and, inspired by recent events, financial crises. Each chapter includes boxes with relevant empirical evidence and ends with exercises. The book is suitable for use in graduate courses in development economics, international finance, and macroeconomics.

Recursive Partnerships and Infrastructures

In Monitoring Movements in Development Aid, Casper Jensen and Brit Winthereik consider the processes, social practices, and infrastructures that are emerging to monitor development aid, discussing both empirical phenomena and their methodological and analytical challenges. Jensen and Winthereik focus on efforts by aid organizations to make better use of information technology; they analyze a range of development aid information infrastructures created to increase accountability and effectiveness. They find that constructing these infrastructures is not simply a matter of designing and implementing technology but entails forging new platforms for action that are simultaneously imaginative and practical, conceptual and technical.

After presenting an analytical platform that draws on science and technology studies and the anthropology of development, Jensen and Winthereik present an ethnography- based analysis of the mutually defining relationship between aid partnerships and infrastructures; the crucial role of users (both actual and envisioned) in aid information infrastructures; efforts to make aid information dynamic and accessible; existing monitoring activities of an environmental NGO; and national-level performance audits, which encompass concerns of both external control and organizational learning.

Jensen and Winthereik argue that central to the emerging movement to monitor development aid is the blurring of means and ends: aid information infrastructures are both technological platforms for knowledge about aid and forms of aid and empowerment in their own right.

Many developing countries find it difficult to raise the revenue required to provide such basic public services as education, health care, and infrastructure. Complicating the policy challenges of taxation in developing countries are issues that most developed countries do not face, including widespread corruption, tax evasion and tax avoidance, and ineffective political structures. In this volume, experts investigate crucial challenges confronted by developing countries in raising revenue.

After a comprehensive and insightful overview, each chapter uses modern empirical methods to study a single critical issue essential to understanding the effects of taxes on development. Topics addressed include the effect of taxation on foreign direct investment; forms of corruption, tax evasion, and tax avoidance that are specific to developing countries; and issues related to political structure, including the negative effects of fiscal decentralization on the effectiveness of developmental aid and the relationship between democracy and taxation in Asian, Latin American, and European Union countries that have recently experienced both political and economic transitions.

Contributors:
Clemens Fuest, Timothy Goodspeed, Shafik Hebous, Michael Keen, Christian Lessmann, Boryana Madzharova, Giorgia Maffini, Gunther Markwardt, Jorge Martinez-Vazquez, Paola Profeta, Riccardo Puglisi, Nadine Riedel, Simona Scabrosetti, Johannes Stroebel, Mirco Tonin, Arthur van Benthem, Li Zhang, George Zodrow

The Townsend Thai Project

Running since 1997 and continuing today, the Townsend Thai Project has tracked millions of observations about the economic activities of households and institutions in rural and urban Thailand. The project represents one of the most extensive datasets in the developing world. Chronicles from the Field offers an account of the design and implementation of this unique panel data survey. It tells the story not only of the origins and operations of the project but also of the challenges and rewards that come from a search to understand the process of a country’s economic development.

The book explains the technical details of data collection and survey instruments but emphasizes the human side of the project, describing the culture shock felt by city-dwelling survey enumerators in rural villages, the “surprising, eye-opening, and inspiring” responses to survey questions, and the never-ending resourcefulness of the survey team. The text is supplemented by an epilogue on research findings and policy recommendations and an appendix that contains a list and abstracts of published and working papers, organized by topic, using data from the project.

Social and economic policies are too often skewed by political considerations. The Townsend Thai Project offers another basis for policy: accurate measurement based on thoroughly collected data. From this, a clear template emerges for understanding poverty and alleviating it.

Essays in Honor of Michael J. Piore
Edited by Paul Osterman

In Economy in Society, five prominent social scientists honor Michael J. Piore in original essays that explore key topics in Piore’s work and make significant independent contributions in their own right. Piore is distinctive for his original research that explores the interaction of social, political, and economic considerations in the labor market and in the economic development of nations and regions. The essays in this volume reflect this rigorous interdisciplinary approach to important social and economic questions.

M. Diane Burton’s essay extends our understanding of internal labor markets by considering the influence of surrounding firms; Natasha Iskander builds on Piore’s theory of immigration with a study of Mexican construction workers in two cities; Suzanne Berger highlights insights from Piore’s work on technology and industrial development; Andrew Schrank takes up the theme of regulatory discretion; and Charles Sabel discusses theories of public bureaucracy.

The narrative of development economics is now infused with discussions of institutions. Economists debate whether institutions--or other factors altogether (geography, culture, or religion)--are central to development. In this volume, leading scholars in development economics view institutions from a microeconomic perspective, offering both theoretical overviews and empirical analyses spanning three continents. After substantial introductory chapters by Pranab Bardhan and Marcel Fafchamps, two scholars who have published important work on this topic, each of the remaining chapters examines a particular set of institutions in a unique setting. These chapters treat the effects of Angola’s violent conflict on that country’s development; institutional accountability in Uganda; the effect of Indonesia’s ethnic diversity on the distribution of public goods; the impact of trade liberalization on India’s investment climate; extended family networks in Mexico; and a microeconomic perspective on land rights in Ethiopia. The chapters demonstrate the remarkable heterogeneity of institutions--policy change is mediated through local market institutions, government institutions, and families--as well as the empirical and methodological ingenuity of current research into this crucial topic. Contributors Manuela Angelucci, Oriana Bandiera, Pranab Bardhan, Timothy Besley, Martina Björkman, Robin Burgess, Giacomo De Giorgi, Stefan Dercon, Marcel Fafchamps, Rajshri Jayaraman, Pramila Krishnan, Eliana La Ferrara, Gilat Levy, Marcos A. Rangel, Imram Rasul, Ritva Reinikka, Jakob Svensson

The microfinance revolution has allowed more than 150 million poor people around the world to receive small loans without collateral, build up assets, and buy insurance. The idea that providing access to reliable and affordable financial services can have powerful economic and social effects has captured the imagination of policymakers, activists, bankers, and researchers around the world; the 2006 Nobel Peace Prize went to microfinance pioneer Muhammed Yunis and Grameen Bank of Bangladesh. This book offers an accessible and engaging analysis of the global expansion of financial markets in poor communities. It introduces readers to the key ideas driving microfinance, integrating theory with empirical data and addressing a range of issues, including savings and insurance, the role of women, impact measurement, and management incentives. This second edition has been updated throughout to reflect the latest data. A new chapter on commercialization describes the rapid growth in investment in microfinance institutions and the tensions inherent in the efforts to meet both social and financial objectives. The chapters on credit contracts, savings and insurance, and gender have been expanded substantially; a new section in the chapter on impact measurement describes the growing importance of randomized controlled trials; and the chapter on managing microfinance offers a new perspective on governance issues in transforming institutions. Appendixes and problem sets cover technical material.

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