This was an evidence submission to the UK Parliament's International Development Committee. I argue that while BII (British International Investment) has been a leader amongst development finance institutions (DFIs) in important respects, and has a strong staff and management focused on improving development outcomes, it still suffers from constraints that limit the impact of DFIs as a whole in supporting sustainable development, especially in the poorest countries. Like other DFIs, BII is unable to mobilize significant capital by crowding in private finance to its investments, its efforts to create new markets for private finance have had limited success and its use of subsidized capital has been inefficient.
Categories
- A. Upside of Down (1)
- B. Getting Better (2)
- C. Life Liberty and the Pursuit of Utility (11)
- D. Overselling the Web? (8)
- E. Economic Development (220)
- F. Globalization (156)
- G. Corruption and Transparency (44)
- H. Global Health (59)
- I. Happiness (30)
- J. Internet and ICTs (43)
- K. Gender (29)
- L. Education (20)
- M. National Security (32)
- N. Inequality (60)
- O. Environment (26)
- P. Other Topics (49)
- Q. Academic writing (123)
- R. Columns and general writing (400)
- S. Speaking (1)
Scenarios for Future Global Growth to 2050
A CGD Working Paper with Zack Gehan. We develop scenarios for the shape of the global economy in 2050 building on a simple regression of the historic relationship between current income and lagged income, demographic features, climate, and education, using the coefficients to develop a “central” forecast and error terms to set high and low bounds on country outcomes. Scenarios examine combinations of low and high outcomes for different country groupings. “Central” forecasts suggest slowing per capita growth rates for high income countries as well as many upper middle income countries including China, with continued global income convergence. Scenario exercises suggest the potential for considerable variation in outcomes including global share of the economy and voting power in international institutions..
Climate Change May Have Only Small Effects on Long-Run Global GDP. So What?
A CGD note. The long run global estimates of climate impact on GDP are small. That hides the fact that there are big volatility shocks and impacts are concentrated in poorer countries. And that matters a lot for policy response.
Should Infrastructure Investors Care About Human Capital?
A CGD Working Paper with George Yang. There is considerable interest in increasing private participation in infrastructure to meet the twin goals of climate mitigation and development in low- and middle-income countries. At the same time, this infrastructure needs to make returns in order to be financially sustainable. This paper reviews evidence on the economics of infrastructure investment and the role of human capital and uses two approaches to provide additional evidence on the link between human capital and infrastructure returns: (i) using estimated returns to individual World Bank infrastructure projects and their relationship to country levels of human capital and (ii) broader approaches linking the macroeconomic impact of infrastructure investment in the presence of varying human capital stocks.
America Shouldn’t Copy China’s Belt and Road Initiative
A co-authored Foreign Affairs piece with Scott Morris. The US should leave infrastructure to the World Bank and 'compete' bilaterally with China on human rather than physical capital.
Technology and Development: An Exploration of the Data
Co-authored CGD working paper with George Yang. We present data on the global diffusion of technologies over time, updating and adding to Comin and Mestieri’s "CHAT" database. We analyze usage primarily based on per capita measures and divide technologies into the two broad categories of production and consumption. We conclude that there has been strong convergence in use of consumption technologies with somewhat slower and more partial convergence in production technologies. This reflects considerably stronger global convergence in quality of life than in income, but we note that universal convergence in use of production technologies is not required for income convergence (only that countries are approaching the technology frontier in the goods and services that they produce). Dataset here.
5 Reasons to Be Optimistic About 2022
For Foreign Policy. More equitable vaccination, new vaccines, more sustainable power, India will be the world's largest country, renewed economic growth and some hope for tigers.
Why Do Some Donors Give More Aid to Poor Countries?
A CGD note. Donors vary considerably in how much they focus their spending on poorer countries. There are good reasons to believe that the utility-maximizing allocation is focused heavily on the world’s poorest countries, where an extra dollar is likely to make the greatest difference to welfare. However, donors may also allocate resources towards humanitarian causes: particularly seeing disadvantaged subgroups within countries including refugees fleeing violence or natural disasters as deserving particular attention. In addition, donors might believe their aid will achieve more in democratic or ‘well governed’ countries. Perhaps less legitimately, donors might prefer to allocate more aid to countries with closer political or economic ties: ex-colonies, allies, supporters in the UN, or trade partners. Similarly, they might choose to focus their aid on the ‘near abroad,’ as a tool of diplomacy or reflecting higher immediate self-interest. This paper uses some of the indicators highlighted as significant by that literature to examine if they can help explain the variation in poverty focus of donor aid.
Your World, Better
Your World, Better: Global Progress and What You Can Do About It is a book written for the smart and engaged middle school student. It looks at how America and the World has changed since the reader's parents and grandparents were young: what has happened to health and wealth, homes, school and work, rights and democracy, war and the environment, happiness and depression. It talks about the things that have gotten better, the sometimes-intensifying challenges that remain, and what readers can do about them.
Your World Better is optimistic, but it doesn’t shy away from the considerable problems we face: from inequality through discrimination and depression to climate change and infectious threats. It is meant to encourage kids to help make the world better themselves: tip them from a sense of powerlessness toward action, not into complacency.
The pdf of Your World Better is available to download here for free. Or you can buy a kindle version for 99 cents or a hard copy for $8.10 on Amazon (or six pounds on UK Amazon here). Any author royalties from those sales will be donated to UNICEF (so far, a bit more than $800 has been donated, thanks!). I talk about the book to Marian Tupy for the Human Progress podcast and to two (fantastic) middle schoolers for NPR. Then I did a Slack chat with five middle schoolers for Slate. A CGD discussion about the book and talking to children about progress is here. And here's a fifteen minute video about the book (or try it on Youtube). I am happy for the *text* (not pictures) to be copied or redistributed in any medium, and/or remixed or transformed for any purpose, with attribution.
"Everyone, no matter how old, or how young, should read this. I’m sending to grandkids and their parents." --Nancy Birdsall
"Great read for middle school kids who want to understand how the world is getting better -- and can become even more so!" --Parag Khanna
"How can you pass up a free book?! And one that is so relevant for today? If you know a middle school student or teacher, pass this along! Incredibly fresh and honest." --Karen Schulte
"Kids are taught that everything's getting worse and we're all doomed--factually incorrect, and a message that leads to cynicism & fatalism, not constructive action. An antidote: Charles Kenny's new Your World, Better..." --Steven Pinker
Degrowth in the Age of Dickens
For The Breakthrough Journal. In his Principles of Political Economy, JS Mill wrote a chapter “Of the Stationary State.” In it he argued that the need for economic growth in the richest countries had run its course. “It is only in the backward countries of the world that increased production is still an important object.” I discuss that idea and some possible lessons for the modern degrowth movement.
We Should Be Spending More of Available Aid in Poorer Countries, Not Less
A working paper for CGD. In the context of an ongoing debate around the role of aid in middle income countries, it is worth revisiting the discussion around aid allocation in general. Accounting for the (disputed) impact of policy and declining marginal returns of aid flows, using a measure designed to focus aid on those in extreme poverty or an approach that accounts for the declining marginal utility of income consistently suggests aid is currently insufficiently focused on the poorest countries. To be equally effective as spending in poor countries, any aid used in upper middle-income countries needs the potential to generate returns that are multiples of those expected in poor countries or have considerable spillover effects in those poorer counties.
Measuring the Development Impact of the IFC and Development Finance
A working paper with George Yang for CGD. Development Finance Institutions (DFIs) including the International Finance Corporation (IFC) tend to look at their development impact using project-level indicators of outputs and employment impacts. Evaluation of the development impact of DFIs should try to estimate the difference between how the country and sector is with the DFI investment com-pared to how the country and sector would be absent the investment. Using a database of IFC and other investments and sector outcomes covering infrastructure and finance, we find the quantity of IFC investment was significantly associated with larger sums of future non-IFC private investment, but it is difficult to find evidence of an impact on outcomes.
Official Development Assistance, Global Public Goods, and Implications for Climate Finance
A policy paper for CGD. Is research into a Covid-19 vaccine a suitable use of Official Development Assistance (ODA)? What about finance to reduce carbon dioxide emissions? Both are clearly good ways to spend money with considerable benefits to developing countries, but is that enough? This note attempts to tease apart a discussion of “is this ODA” from “is this a global public good?” and then separate out again “is this ODA and/or a global public good?” from “is this an efficient way to spend money?” It uses that discussion to frame conclusions about how and what financing of GPGs should be counted as ODA and takes a specific look at the issue of climate change in that regard.
What to Do When You Can’t Prove DFI Additionality
A note for CGD with Todd Moss. Answer: competition, make loans less attractive than market, use transparent benchmarks.
Direct cash payments work. We’re about to see how
In the Washington Post on the COVID-19 stimulus component that is giving cash directly to people.
The Real Immigration Crisis
For Foreign Affairs. The next several decades will see populations in Europe and North America age and shrink as people have fewer and fewer children. That trend will hurt economic growth and dynamism and leave too few workers for every retiree. Robots and artificial intelligence will not save rich countries from the economic consequences of a shrinking population. Nor, without a dramatic reversal of current policies toward immigrants, will a flow of workers from elsewhere. To avoid sclerosis and decline, the rich world will have to compete to attract immigrants, not turn them away.
Can the US Development Finance Corporation Compete?
A CGD Policy Paper. The new US International Development Finance Corporation (USDFC) will be considerably larger than its predecessor, and it will also be more focused on low and lower middle income countries. It will have new tools to deliver but face expanded competition. The major challenge to the DFC is not Chinese investment (which largely funds projects ill-suited to support from the DFC), but other development finance institutions, many of which are deploying increasing quantities of subsidized capital to attract project sponsors. It is not clear that there are sufficient suitable deals in the shrinking set of low and lower-middle income countries to absorb DFI development finance, and the USDFC could lose projects to subsidized finance from elsewhere if this turns out to be the case. Given that, it should be a priority for the United States to agree rules with other donors that prevent development finance institutions from competing on the basis of subsidy. The new DFC needs increased capacity to deliver deals: both the tools provided by the BUILD Act which are being constrained by the administration and the staff and budget to actively build a pipeline of projects. A considerably bolstered administrative budget may involve reducing –potentially to zero—the profitability OPIC traditionally enjoyed.
Automation and AI: Implications for African Development Prospects?
A CGD note. I'm comparatively optimistic about automation: Africa needs more of it, the rate of automation does not appear to be rapid enough to suggest short-term dislocation, manufacturing jobs have moved rather than gone away and services offers another technology-enhanced route to development.
When Does “What Works” Work? And What Does that Mean for UK Aid R&D Spend?
A note for CGD with Euan Ritchie and Lee Robinson. This paper argues there is a (fuzzy) spectrum of development procedures, for some of which global innovation, evaluation, or “best practice” can be informative, for some of which local evaluation or experimentation can be useful, and for some of which perhaps only practical experience and local wisdom can help. That there is a spectrum of intervention types and research opportunities, and that local evidence is often required, has implications for the kind of research that UK aid can usefully support as part of its R&D program and where that research should happen. In turn, that suggests a reform agenda for the way UK ODA for R&D is currently spent.
Marginal, Not Transformational: Development Finance Institutions and the Sustainable Development Goals
A policy paper for CGD. Development finance institutions have positioned themselves as key agencies to help the world meet the Sustainable Development Goals. It is doubtful that they can deliver. This paper outlines the challenges facing DFIs in achieving (anywhere near) such an expansion in their impact, particularly in infrastructure and particularly in the poorest countries. It notes that private investment in SDG priority areas is low in the poorest countries, and the record of private investment in rolling out services is mixed. These issues are linked in part to significant supply side constraints based on country characteristics. DFIs do better than the market as a whole at investing in challenging infrastructure–but not by much. And while the scale of their ‘leverage’ in terms of attracting dollars that would otherwise not have been invested is hard to determine, in the poorest markets in infrastructure it is certainly low. Finally, DFIs and donors more broadly have long tried to improve deal flow with limited success, suggesting there are few deals on the margin of occurring which only require small extra incentives to materialize.
UK Research Aid: Tied, Opaque and Off-Topic?
A policy paper for CGD with Lee Robinson and Euan Ritchie who did nearly all of the work. The UK has considerably increased the amount of aid it spends on research in recent years. The information associated with the majority of this research aid is vague, raising questions about transparency. A large amount of the research is financed using an allocation mechanism that effectively ties it to UK institutions. There are also questions as to the poverty focus of some of the research conducted, given the explicit intention of the UK government to find existing activity to reclassify as ODA following the legislating of the 0.7 percent target. We suggest reporting reforms that will increase transparency and allow greater scrutiny of the way UK research aid is spent. We also call for the UK to live up to its reporting to the OECD that all British aid is untied.
Fighting crony capitalism at the World Bank
In The Hill, railing about the the IDA Private Sector Window.
A Radical Proposal To Fight Poverty In The Developing World: Tax The Rich More Than The Poor
A piece for Vox on the barely progressive arguably regressive tax and spending systems of poorer developing countries.
Speeding Sustainable Development: Integrating Economic, Social, and Environmental Development
A CGD Working Paper on policy coordination to help meet the SDGs. TLDR: Important, but hard.
This paper discusses the role for policy integration to speed progress towards delivering the Sustainable Development Goals (SDGs). This is required because the goals set very ambitious targets for progress across a range of interlinked areas, encompassing both synergies and tradeoffs. Lessons of policy integration at the national level suggest that it is usually at best partially successful, requiring significant commitment from the highest levels of government. Policy integration regarding foreign affairs has proven even more challenging. This paper suggests a mechanism for prioritizing coordination and the use of coordination tools including regulation, safeguards, taxes, and subsidies. It also suggests re-orienting ministerial responsibilities where possible from input control to achievement of outcomes as well as tools to promote innovation by subnational governments and the private sector.
Two papers on the IFC and other Development Finance Institutions
Inside the Portfolio of the International Finance Corporation: Does IFC Do Enough in Low-Income Countries? with Jared Kalow and Vijaya Ramachandran is a CGD Policy Paper. Between 2001 and 2016, the International Finance Corporation (IFC) committed $127 billion through 3,343 projects across the developing world. During this period, the bulk of IFC’s portfolio has moved lower middle-income countries to upper middle-income countries. Between 2001 and 2004, IFC’s portfolio was dominated by lower-middle income countries. Between 2013 and 2016, Turkey, China, and Brazil received $3.8, $2.9, and $3.0 billion in investments respectively, making them some of the largest recipients of IFC investment. The portfolio shift from lower-middle to upper-middle income countries is in significant part due to recipient countries graduating out of lower-middle income status. Our analysis shows that IFC’s portfolio is not focused where it could make the most difference. Low income countries are where IFC has the scale to make a considerable difference to development outcomes. These are the countries with the greatest need for investment and (implicit) guarantee mechanisms for private investment. And these are the countries receiving the bulk of advisory services support. While an excessive portfolio shift might imperil IFC’s credit rating, the evidence suggests that there is considerable scope for increasing commitments to low income countries without significant impact to IFC’s credit scores.
Comparing Five Bilateral Development Finance Institutions and the IFC with Jared Kalow , Ben Leo and Vijaya Ramachandran is another policy paper. Development Finance Institutions (DFIs)—which provide financing to private investors in developing economies—have seen rapid expansion over the past few years. A recent estimate is that annual commitments from DFIs as a whole grew from $10 to $70 billion between 2002-2014. Many DFIs have ambitions to play an even greater role going forward, continuing expansion and working more in fragile states. DFIs remain a comparatively under-studied set of development institutions in terms of their activities and impacts. Much of the information about DFIs is presented in forms that make aggregation and comparison difficult and time-consuming. This paper describes and analyses a new dataset covering the five largest bilateral DFIs alongside the IFC which includes project amounts, standardized sectors, instruments, and countries. The aim is to establish the size and scope of DFIs and to compare and contrast them with the IFC.
Meeting the Sustainable Development Goal Zero Targets: What Could We Do?
A working paper for CGD with Mallika Snyder. The Sustainable Development Goals are an ambitious set of targets for global development progress by 2030 that were agreed by the United Nations in 2015. Amongst the 169 targets are a number that call for universal access, universal coverage, or universal eradication. These include ending extreme poverty and malnutrition alongside preventable under-5 deaths, ending a number of epidemics, providing universal access to sexual and reproductive health services, primary and secondary education, a range of infrastructure services, and legal identification. These have often been labeled “zero targets.” A review of the literature on meeting these zero targets suggests very high costs compared to available resources, but also that in many cases there remains a considerable gap between financing known technical solutions and achieving the outcomes called for in the SDGs. In some cases, we (even) lack the technical solutions required to achieve the zero targets, suggesting the need for research and development of new approaches.
The IMF: Crawling the Walk on Gender?
A CGD policy note with Tanvi Jaluka and Michael Brown on IMF Article IV negotiations since gender was declared 'macrocritical.' In short, there has been increased attention to the issue as reflected in word counts and discussion of women’s labor force participation, but there is still a long way to go.
Estimating the SDGs' Demand for Innovation
Estimating the SDGs' Demand for Innovation is a CGD Working Paper written with Dev Patel. How much innovation will be needed to meet the United Nations’ Sustainable Development Goals? We model shifts in the cross-country relationship between GDP per capita and achievement in key development indicators as “technological gains” and convergence to the best performers at a given income as “policy gains.” Assuming that the United Nations’ income growth projections for low- and middle-income countries are met, we estimate the residual demand for technology and policy innovation needed to meet several critical targets of the SDGs. Our results suggest that (i) best performers are considerably outperforming the average performance at a given income level, suggesting considerable progress could be achieved through policy change but that (ii) the targets set in the SDGs are unlikely to be met by 2030 without very rapid, ubiquitous technological progress alongside economic growth.
Why America's overseas aid agency needs reform
Time to revisit the 1961 Foreign Assistance Act. For the Economist.
Trump's Flawed Global Vision
For US News and World Report --the world is getting more peaceful and collaboration is increasingly important to US and global well-being.
Political polarisation has grown most among the old
For the Economist. Old people stand in the way of policies that can deal with the problem of too many old people.
Gender Laws, Values, and Outcomes: Evidence from the World Values Survey
A CGD Working Paper with Dev Patel. This paper analyzes six waves of responses from the World Values Survey to understand the determinants of beliefs about women’s roles in society and their relationship with the legal system and outcomes. Using survey data for 300,000 individuals, we find that characteristics of an individual’s home country only explain about a fifth of the variation in values, and a single individual can report strongly different norms about women’s equality across different domains. There is a strong correlation between norms, laws and female labor force participation and between norms and the proportion of legislators who are women—but not between norms and relative female tertiary education. There is some suggestive evidence that laws may be more significant than norms in determining female employment outcomes, but the available evidence does not allow for strong causal statements at the cross-country level.
Does small government really work? A look at the least well-funded governments around the world
For Quartz: the problem with Liberia is not that it spends too much on government.
An economist warns that the next generation of feminists will feel even more frustrated
For Quartz. The original title, still in the weblink, gave me a panic attack.
Time to Get Serious About Nuclear Power
The US should be investing more in nuclear power research --for Ozy.
Good Riddance to the World Bank’s “Developing” Nations
The World Bank's World Development Indicators, in the print edition, has got rid of the term 'developing countries.' Online, and in operations, nothing has changed. Does this even count as a baby step? For Zocalo Public Square.
2015: The Best Year in History for the Average Human Being
(Still) getting better. For the Atlantic.
Why the World Bank is Changing the Definition of the Word "Poor"
With Justin Sandefur, for Vox. The piles of arbitrary adjustments that got us from $1.25 to $1.90.
If Everyone Gets Electricity, Can the Planet Survive?
The United Nations has set conflicting goals for 2030: combatting climate change while providing energy to all. It suggests they aren't by low-balling electricity demand. For the Atlantic.
Give Poor People Cash
There’s a simple way to reform welfare: Send money to those who need it, without conditions. For the Atlantic.
Immigrants to the Rescue
For Businessweek: with declining birth rates, rich countries need foreigners.
Obama Teaches Africa to Fish
Where is the bold new Africa strategy we were promised? For the Atlantic.
Strengthening the Addis Accord
Just in time for the Addis Financing for Development conference, an essay [/collection of blogs] on making the Addis Accord better... Some of the ideas have already been incorporated, sort of, a bit.
A Lesson From Greece: Beware the Prophets of Boom
Bloomberg column suggesting Greece is one more piece of evidence it is a mistake to let the same people forecast growth who are agreeing debt deals.
Suggested Proposals for the Third International Conference on Financing for Development
The Financing for Development conference in Addis Ababa in July represents one of President Obama’s last major opportunities to secure his development legacy. This catchily titled CGD policy brief co-authored with Beth Schwanke offers 14 proposals for commitments the United States Government should consider advancing for the Conference on Financing for Development. [Bets in advance on a hit rate of 0.5/14].
Finding Cash for Infrastructure in Addis: Blending, Lending and Guarantees in Finance for Development
A CGD Policy Working Paper. The total scale of incremental investment requirements in infrastructure in developing countries has been estimated at around USD 1 trillion a year, with a range of related studies suggesting numbers between $815 billion to $1.3 trillion. While all such numbers are open to considerable debate, and were not designed to measure the cost of delivering the specific SDG infrastructure targets, they suggest the likely scale of the financing challenge for an SDG agenda which includes universal coverage to adequate housing, water, sanitation, modern energy and communications technologies. The complexity of infrastructure finance in developing countries suggests that external private investment will remain a minor player in the financing of infrastructure for development. Nonetheless, reforms of development finance institutions and multilateral development banks alongside infrastructure pricing in recipient countries could considerably increase financial flows, and the Addis Financing Conference later this year could help provide the authorizing environment for such reforms.
Student Volunteers Heading Abroad: Consider Staying Home Instead
Slightly misleading headline. Go, just remember you'll be pretty useless, and see it as a learning experience --the start and motivation for a life of advocating or working for development. For @BW.