Battling Infection,
Fighting Stagnation, with
Shankha Chakraborty and Fidel Perez-Sebastian , January 2011 (revised version). Download PDF file.
Why are some countries mired in poverty and ill health? Can
policy facilitate their transition to sustained growth and better living
standards? We offer answers using a dynamic model of disease and development.
Endogenous transmission of infectious disease generates non-ergodic
growth where income alone cannot push a country out of a low-growth development
trap. Policy interventions, for example external aid, can successfully
accelerate growth only when directed towards improving health and eliminating
the burden of infectious disease. Prioritizing improvements to adult mortality
over morbidity is better for development.
Which Reforms Work and under What
Institutional Environment: Evidence from a New Dataset on Structural Reforms,
with Alessandro Prati and Massimiliano Onorato, October 2011 (revised version). Download PDF file.
Are structural reforms growth enhancing? Is the effectiveness of reforms constrained by a country's distance from the technology frontier or by its institutional environment? This paper takes a new and comprehensive look at these questions by employing a novel dataset that includes several kinds of real (trade, agriculture and networks) and financial (domestic finance, banking, securities, and capital account) reforms for an extensive list of developed and developing countries, going back to the early 1970s. First pass evidence based on growth breaks analysis and on panel growth regressions suggests that on average both real- and financial-sector reforms are positively associated with higher growth. However, in several occasions botched reforms resulted in growth disasters. More importantly, the positive reform-growth relationship is shown to be highly heterogeneous and to be influenced by a country's constraints on the authority of the executive power and by its distance from the technology frontier. Finally, there is some evidence that crises (defined as severe growth downturns) are associated with subsequent reform upticks.
Investing in
Public Investment: An Index of Public Investment Management Efficiency, with Era Dabla-Norris,
Jim Brumby, Annette Kyobe, and Zac
Mills, October 2011 (revised version).
Download
PDF file | Data.
Pritchett (Journal of Economic
Growth 2000; 5:361-384) convincingly argued that the difference between
investment cost and capital value is of first-order empirical importance
especially for developing countries whose public investment is the primary
source of investment. This paper constructs a public investment efficiency
index that captures the institutional environment underpinning public
investment management across four different stages: project appraisal,
selection, implementation, and evaluation. Covering 71 countries, including 40
low-income countries, the index allows for benchmarking across regions and
country groups and for nuanced policy-relevant analysis and identification of
specific areas where reform efforts could be prioritized. Research applications
are outlined.
Efficiency-Adjusted Public
Capital and Growth, with
Sanjeev Gupta, Alvar Kangur and Abdoul Wane, September 2011. Download PDF file
| Data.
This paper constructs an efficiency-adjusted public capital stock series and
re-examines the public capital and growth relationship. The paper also examines
the effects of four specific stages of the public investment process -
appraisal, selection, implementation and evaluation - on capital accumulation
and growth. The results show that public capital is a significant contributor
to economic growth. Although the estimated coefficient for the income share of
public capital is larger in middle- than in low-income countries, the opposite
is true for the marginal product of public capital. The quality of public
investment, as measured by variables capturing the adequacy of project
selection and implementation, are statistically significant in explaining
variations in economic growth, a result mainly driven by low-income countries.
Rising Income Inequality: Technology,
or Trade and Financial Globalization?, with Florence Jaumotte, and Subir
Lall, August 2011 (revised version). Download PDF
file | Data
| Data
Description.
We examine the relationship between the rapid pace of trade and financial globalization and the rise in income inequality observed in most countries over the past two decades. Using a newly compiled panel of 51 countries over a 23 year period from 1981-2003, we report estimates that support a greater impact of technological progress than globalization on inequality. The limited overall impact of globalization reflects two offsetting tendencies: whereas trade globalization is associated with a reduction in inequality, financial globalization - and foreign direct investment in particular - is associated with an increase in inequality.
Who Benefits from Financial
Development? New Methods, New Evidence, with Daniel Henderson , and Christopher
Parmeter, July 2011. Download PDF file.
This paper takes a fresh look at the impact of financial development on
economic growth by using recently developed generalized kernel methods that
allow for heterogeneity in partial effects, nonlinearities, and endogenous
regressors. Our results suggest that while the positive impact of financial
development on growth has increased over time, it is also highly nonlinear with
more developed nations benefiting while low-income countries do not benefit at
all. This finding contributes to the ongoing policy debate as to whether
low-income nations should scale up financial reforms.
The
End of an Era? The Medium- and Long-term Effects of
the Global Crisis on Growth in Low-Income Countries, with Andrew Berg, Catherine Pattillo
and Nikola Spatafora, October 2010. Download PDF file.
This paper investigates the medium- and long-term growth
effects of the global financial crises on LICs. Using several methodological
approaches, including impulse response function analysis, growth spells techniques
and panel regressions, we show that external demand (ED) shocks are not
historically associated with sharp declines in output growth. Given existing
evidence that LICs were primarily impacted by such a shock, our analysis
provides some optimism on the chances that LICs will avoid a protracted period
of slow growth. However, we also show that there seems to be persistent output
losses associated with ED shocks in the medium-run. In terms of policy
recommendation, our analysis provides evidence that countries with lower
deficits, lower debt, more flexible exchange rate regimes, and higher stock of
international reserves are more likely to dampen the effects of an ED shock on
growth.
Is Newer Better? Penn World Table
Revisions and Their Impact on Growth Estimates,
with Simon
Johnson , William Larson, and Arvind Subramanian
, October 2009. Download NBER Working Paper no 15455;
Latest version PDF file. VoxEU.
This paper sheds light on two problems in the Penn World Table (PWT) GDP estimates. First, we show that these estimates vary substantially across different versions of the PWT despite being derived from very similar underlying data and using almost identical methodologies; that this variability is systematic; and that it is intrinsic to the methodology deployed by the PWT to estimate growth rates. Moreover, this variability matters for the cross-country growth literature. While growth studies that use low frequency data remain robust to data revisions, studies that use annual data are less robust. Second, the PWT methodology leads to GDP estimates that are not valued at purchasing power parity (PPP) prices. This is surprising because the raison d’ętre of the PWT is to adjust national estimates of GDP by valuing output at common international (purchasing power parity [PPP]) prices so that the resulting PPP-adjusted estimates of GDP are comparable across countries. We propose an approach to address these two problems of variability and valuation.
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