Thursday, November 29, 2012

The deadliest weapon in Nuba?

I am preparing a first draft of a joint paper with Asha Abdel Rahim and Aleksi Ylonen. We analyze data that Asha collected in the Nuba Mountains in 2008, when a short interwar period made possible for international institutions to enter the area.

Given I am not expert in the topic (but Asha and Aleksi are), I am trying to understand the situation from different sources. Nuba Mountains is one of the most isolated places on earth, so there is no so much information. One of the first things you find on the web is the fantastic photographic work of the (in)famous Leni Riefenstahl.



She was prized worldwide from her work in Nuba, and for some it was her redemption after a dark past... but then I found this really amazing documentary made in 1998 by the Slovenian writer, documentary film maker, human rights activist, journalist and worldwide traveler Tomo Kriznar, some of the few that was in the area during the civil war in the 90s. He went back to the village in which Leni did most of her work, and discovered something really disturbing. There were no more naked painted people dancing and wresting. Instead, they were dressed and reading the Koran... what had happened? One of the elders told him: "IT WAS THE BOOK". Which book??? After Khartoum discovered  Riefenstahl's book , decided to increase the Arabization and military control in Kau village and the rest of Nuba... her camera was a deadly weapon, again.


Monday, November 19, 2012

Enlaces perdidos - mercados inexistentes: El proceso de transformación de las economías rurales

Versión en español del post sobre el estudio en que se resumen más de tres años de investigación acerca de la transformación de las economías primitivas, con datos recolectados en aldeas rurales de Gambia: "Missing links, missing markets: Internal exchanges, reciprocity and external connections in the economic networks of Gambian villages". 

La transición desde actividades económicas primitivas a intercambios más complejos que eventualmente han dado origen a economías de mercado y otros sistemas económicos modernos fue un elemento importante en la estructura de las teorías de los economistas clásicos y una punto fundamental para los primeros sociólogos económicos como Thorsten Veblen, Max Weber y, en particular, Karl Polanyi. En la "Gran transformación" de Polanyi, las economías modernas son formadas a partir de una red de intercambios recíprocos de comunidades aisladas que evoluciona hasta un sistema que institucionaliza el mercado. El concepto de economías primitivas como intercambios recíprocos se basa principalmente en la influyente descripción de Malinowski del sistema de producción de los habitantes de las islas Trobriand, la que a su vez es la base para el análisis de Mauss sobre la economía del don

El proceso de transformación fue formalizado por Rachel Kranton (AER, 1996).  En su modelo los agentes deciden entre intercambios recíprocos (economía del don) con "agentes conocidos" (en términos de preferencias, costos de producción y otras características relevantes), o transacciones  de mercado con agentes anónimos, utilizando dinero como medio de intercambio. Si el costo de búsqueda de agentes anónimos es mayor que el beneficio que se obtiene por la diversificación de consumo que ofrecen los mercados, los agentes preferirán intercambios recíprocos. Uno de los principales resultados es que la reciprocidad se puede mantener incluso si existe la alternativa de usar el mercado para las transacciones.

El objetivo de mi investigación es contribuir al estudio empírico del proceso de transformación de las sociedades rurales tradicionales utilizando una perspectiva de análisis de redes. Para esto he tenido la fortuna de recolectar, luego de de 3 meses de trabajo de campo, una base de datos única sobre redes económicas (tierra, trabajo, insumos y crédito) en 60 comunidades rurales de Gambia. En estas aldeas predominan los intercambios económicos tradicionales no monetarios, pero unos pocos hogares participan en transacciones de mercado (en torno al 10%). El objetivo es explorar si estos hogares tienen un comportamiento distinto dentro de la economía de la comunidad.


La red de intercambios económicos en una de las aldeas 



Como se puede ver en la figura anterior, la mayoría de los hogares de la aldea están conectados con al menos un enlace en uno o más intercambios económicos. Además, muchos de estos intercambios son recíprocos (el enlace es bidireccional). Si el proceso de transformación es cierto, los hogares con conexiones de mercado debiesen tender a abandonar las transacciones dentro de la aldea y en particular aquellas que implican reciprocidad. 

En el análisis empírico los datos son estudiados tanto a nivel de hogares y como nivel de cada enlace (link-level), utilizando técnicas de propensity score matching, MCO en modelos lineales y regresiones diádicas. En todas las especificaciones econométricas se encuentra evidencia para las dos hipótesis principales: (i)  Sustituibilidad entre intercambios internos y externos, es decir, hogares con relaciones económicas externas son menos propensos a estar involucrados en interacciones económicas dentro de la aldea, y (ii) reciprocidad versus mercado, o sea  que hogares con relaciones económicas externas son menos propensos a estar involucrados en intercambios recíprocos con otros miembros de la comunidad.

Si bien los resultados muestran una relación negativa entre participación en transacciones de mercado y en la economía de la aldea, no es evidente interpretar ésta en forma causal. Para eso se deben cumplir ciertos supuestos especificados en el paper. Básicamente, se debe esperar que las características no observables que determinan la creación de enlaces internos afecten a la formación de los enlaces externos en una misma dirección. Yo sostengo que esto es probable, pero un potencial sesgo  en la estimación sigue siendo un problema no resuelto totalmente, y que permanece como desafío a tratar en futuras investigaciones.

Incluso si los resultados se consideran como correlaciones parciales,  se pueden deducir importantes implicaciones para políticas públicas y de cooperación internacional. Muchos programas de desarrollo rural tienen como objetivo aumentar la integración de aldeas remotas al mercado. Estos programas podrían tener efectos secundarios no deseados, tales como la reducción de interacciones dentro de la comunidad y la destrucción del sistema de intercambio en que se basa la economía del don. Por lo tanto, es necesario tener en cuenta la complejidad de los intercambios de éstas comunidades para poder comprender los efectos de intervenciones orientadas al mercado. Por ejemplo, Von Braun and Webb (1989) y  Carney and Watts (1990) han mostrado como en Gambia programas que intentaron aumentar la productividad agrícola y la producción de cultivos comerciales fallaron porque el sistema económico tradicional no fue considerado en el diseño.

Reunión de aldea en que los datos de redes  de intercambio económico fueron recolectados  


Friday, November 9, 2012

NEUDC 2012: Papers I liked

A lot of fun and a lot of jet lag. Short but meaningful. It was a great pleasure to participate for first time at the NEUDC conference last weekend. Many papers blew up my mind and gave me good new ideas, here a selection of my favorites (at least from the presentations I assisted):


"Aid Under Fire: Development Projects and Civil Conflict"
Presented by: Benjamin Crost (University of Colorado Denver).
Main message: Elegible munipalities for a CDD program in Phillipines experienced a large increase in conflict casualties compared. This is likely to be related with rebel groups trying to impede increase for government support in these areas.

"Preferences over leisure and consumption of siblings and intra-household allocation"
Presented by: Martina Kirchberger (University of Oxford)
Main message: While most models consider children as passive agents, they are agents with their own preferences over leisure and consumption. A model of Bart versus Lisa is presented and supported with data from many countries.

"Violence, Emotional Distress, and Induced Changes in Risk Attitudes Among the Displaced Population in Colombia"
Presented by: Andres Moya (UC Davis)
Main message: Data collected in a group of internally displaced rural households and a group of non-displaced rural households in Colombia provide evidence that more severe and more recent episodes of violence and the incidence of anxiety disorders induce higher levels of risk aversion.

"Water Supply and Water handling-Complements or Substitutes"
Presented by: Elena Gross (University of Göttingen)
Main message: Households in rural Benin consider improved water supply and water handling as substitutes of water provision. This implies a neutralization of the effects of public water infrastructure programs, given households reduce water filtration and disinfection.

"The Value of Advice: Evidence from Mobile Phone-Based Agricultural Extension"
Presented by: A. Nilesh Fernando (Harvard University)
Main message: Indian farmers that received the option to get assistance of a call center and receive other information related to agricultural information in their cell phones changed their behavior, adopting more effective and less hazardous pesticides.

"The Effect of Financial Access on Networks: Evidence from a Field Experiment in Nepal"
Presented by: Margherita Comola (Paris School of Economics)
Main message: Using panel data on the network of financial transactions before and after a field experiment in rural Nepal, evidence of the endogeneity of the networks is provided and estimates of the bias of the exogenous assumption are provided.

And finally, two nice RCTs in Chilito:

"Micro Entrepreneurship Training and Assets Transfers: Short Term Impact on the Poor"
Presented by: Claudia Martinez (University of Chile)
Main message: Business training and asset transfers to micro-entrepreneurs increase significantly employment and income in the short term.

"Savings as Insurance: Evidence from a Randomized Field Experiment among Low-Income Micro-Entrepreneurs in Chile"
Presented by: Dina Pomeranz (Harvard University)
Main message: Women micro-entrepreneurs significantly increase savings when a free saving account is offered. Some of the main effects come from helping the women to confront the hostile environment of a banking institution.

Wednesday, October 31, 2012

Missing links, missing markets: The transformation process of rural societies

This weekend I will be going for first time to the NEUDC conference, to be held at Dartmouth College this year. I am excited, because this is probably the biggest development economics conference in the USA and I will have the opportunity to present my favorite outcome from the Gambian networks project, a paper called  "Missing links, missing markets: Internal exchanges, reciprocity and external connections in the economic networks of Gambian villages". 


The transition from primitive economic activities  to more complex exchanges that eventually lead to market economies or alternative modern economic systems was a relevant element in the structure of theories of the classic economic authors and a key issue for the early economic sociologists like Thorsten Veblen, Max Weber and, in particular, Karl Polanyi. In Polanyi's  great transformation, modern societies are shaped in the transition from a network of communitarian reciprocal exchanges  to institutionalized market interactions. The concept of primitive economies as reciprocal exchanges is largely based on Malinowski's  influential description of the production system of the Trobriand islanders, that is also the foundation for Mauss' analysis of a gift economy.

The transformation process  was formalized by Rachel Kranton (AER, 1996). In her model, agents can choose either reciprocal exchanges with other agents whose preferences, production costs and other relevant characteristics are known, or  market transactions with anonymous agents, using money as medium of exchange. If the cost of searching for trading partners is higher than the benefit obtained from consumption diversification offered by markets, then agents will prefer reciprocal exchanges. One of her main results is that reciprocity can be enforced even if markets exist as an alternative for transactions. 

The aim of the paper is to contribute to the empirical analysis of the process of transformation in traditional rural societies using a network perspective. A unique database on economic networks (land, labor, inputs and credit) collected in 60 villages of rural Gambia, where traditional non-monetary economic exchanges -gift economy- prevail, is used to study  the  behavior of  households involved in market transactions. 

The network of economic exchanges in one village



As can be seen in the figure above, most of the households in the village are connected with a link in one or more economic exchanges. And many of these exchanges are reciprocated (the link is bidirectional). If the transformation process is true, household with connections to the market will tend to abandon transactions inside the village and particularly those that imply reciprocation. Given the Gambian network data have information regarding the existence of links external to the village in each of the networks, I can compare if households with links to the market (that are very few, around 10% of all the households in the village) behave differently. 

The empirical analysis is conducted at both household- and link-level, using propensity score matching techniques, OLS linear models and dyadic regressions.  In all the econometric specifications I find support for the two main hypotheses: (i) Substitutability between internal and external exchanges, i.e. households with external economic links are less likely to be involved in economic interactions within the village; and (ii) Reciprocation  versus market, i.e. households with external economic links are less likely to be involved in reciprocated exchanges with fellow villagers.

In the paper I discuss the assumptions required for a causal interpretation of the results, basically that unobservable characteristics determining the creation of internal links affect the the formation of external links in the same direction. I argue that this is plausible, but the potential bias remains as a not fully solved issue to be addressed in future research. 

Even if taken as partial correlations, there are relevant policy implications related to the findings. Rural development programs that aim to increase market integration of isolated villages can have undesired effects, such as the reduction in community interactions and destruction of the gift exchanging system. Therefore, it is necessary to consider the complexities of community exchanges in order to understand the effects of market-oriented interventions. For instance, Von Braun and Webb (1989) and Carney and Watts (1990) have shown how in The Gambia programs that attempted to increase agricultural productivity and cash crops production failed because the traditional economic system was not considered in the design. 


Village gathering where the data about network of economic exchanges was collected 


RELATED POSTS 

Monday, October 15, 2012

The power of WE in Chile

This post is a contribution to the Blog Action Day, centered in the topic "the power of WE". 

It looks to me that Chileans have only realize about the power of WE after two decades of the return of the democracy in our country. Maybe I was too young, but I could see that at the beginning the hopes and expectations were all concentrated in the possibility to elect our president, MPs and other authorities. The spell was short lasting, given soon we realized about the pitfalls of democracy. Most of us, and in particular the youth, quickly understood that most politicians were rent-seekers and puppets of obscure  influence groups, including many directly related to the former dictator.

System disappointment is a karma for most new democracies, as have been seen in the countries that succeeded in change regime after the fall of the Berlin wall and, recently, the Arab spring. The lost of hopes produces alienated and nihilistic citizens, that forget the power of WE. In economically successful Chile of the last years, many of the energies were concentrated in consumerist compulsion and empty nationalism, arrogance and arrivism.

While I have been living outside Chile for almost 8 years, every time I was back I was shocked by these symptoms.  What happened with the free society for which so many have fought, even with their lives? What happened with all the illusions of my generation, the first to live in democracy after so many years of tyranny?  Was all lost in the shopping center?

But in the last couple of years a ray of hope has struck Chilean society. Maybe the earthquake in 2010 shacked also our conscience.

It was something I discovered in my years as student at Universidad de Chile, when we denied to be involved in the elections of the students center and instead used the power of WE to independently create our institutions: the students' radio, the social action group, the cinema group, the futbol club... this was something called civil society!!! You don't need to wait for politicians and other authorities to do the actions, you have to do it yourself, in association with people that share your motivations and interests.

And looks like many in Chile discovered the power of WE through civil society. While we had economic growth, the system promoted a deepening of inequalities that eventually exploded. Indebted and marginalized students, impoverished workers and pensioners, environmentalists, ethnic and social minorities, isolated regions, they all started the movement that seems to be taking place now with the participation of the Chilean 99%. Sometimes it takes the form of massive pacific rallies and actions, sometimes, unfortunately, violence and  destruction, particularly when confronted with the brutal repression of the police forces that follows the command of politicians that have  lost the track of what is happening in society.

This movements is not just in the streets. It is getting institutionalized in many groups that represent the interests of groups of citizens that try to organize themselves to fight for what they think is right, sometimes at the community-level, sometimes at a national or international level. This is the real democracy.

I may be naive, and my analysis can be overconfident given I live abroad, but I have the hope that in Chile we are going to be capable to harness the power of WE for a better society.


Tuesday, October 9, 2012

German aid transparency - 2012 edition

Last year I called the attention about the unsurprisingly low ranking of German organizations in charge of foreign assistance programs in the ranking of the Aid Transparency Index developed by Publish What You Fund (PWYF). Well, this year the output looks ugly again, but there are sharp differences between organizations.

In last years's edition, KfW was 21st among 58 donors, with 38% score.... not too bad. But in the new release (with improved measures for the score, which make comparison across years a little tricky) KfW ranks 50th over 72 donors, with 26% score!
KfW performed poorly, ranking 50th overall and 6th of seven development finance institutions. KfW also performed significantly worse than GIZ, due to the fact that no activity level information is published systematically; nor is there a public database where such information can be accessed. KfW performs relatively well on the organisation and country level, and is the highest ranking donor that scores 0% at the activity level. KfW does publish project level information for a small number of projects.
Better news for GIZ. Still in the 39th place, but now with more organizations in the ranking, improved from 25% score to 40%:
GIZ performed moderately, ranking 39th and scoring just over the overall average score. It scores below average at both the country and activity levels, though it performs well at the organisation level, where it ranks 19th overall. GIZ’s increased score is almost entirely due to its performance on newly added indicators; it performed very consistently with the 2011 score when controlling for methodological changes, suggesting limited new activity. Most information can be found in a database that publishes basic information for all projects in both English and German, but no financial data is provided — not even the overall financial cost for individual activities. It is also difficult to find and interpret aggregate data.
The lack of transparency is married to the problem of almost nonexistence rigorous impact evaluation of the projects carried out by these institutions, where millions in tax payers money (me included!) are spent without the possibility of surveillance from civil society.

A big challenge ahead for KfW, GIZ, the Ministry for Economic Cooperation and Development (BMZ) and the brand new German Institute for Development Evaluation (that needs to work in its web page before anything).

RELATED POSTS

German aid transparency 


Monday, September 17, 2012

Trade and Development at ETSG

Last week I had the pleasure of assisting for first time to the annual conference organized by the European Trade Study Group (ETSG) in Leuven. Apart from the possibility to taste the lovely Belgian beers offered in the bars of Old Market Square (including a quadruple trappiste!), there were many development-related papers presented that I enjoyed. Here my selection:




Wednesday, July 18, 2012

La (ir)relevancia del salario mínimo en Chile

"Con un sueldo mínimo de $250 mil la cesantía pasaría del 6,7% al 8,6%" son las muy académicas estimaciones de la Ministra del Trabajo respecto al reajuste exigido por algunos sectores.... de adonde viene esa cifra? cuales son los supuestos y la metodología empleada? Seria mejor sincerarse y decir que esta cifra es producto derechamente de alguna aritmética simplista basada básicamente en argumentos ideológicos.

La verdad es que estimaciones exactas del impacto del salario mínimo son imposibles, y las que existen deben tener un intervalo de confianza muy amplio, el que, claramente no es informado en las estimaciones de la Ministra. Tal como lo señalan economistas del CEA, las estimaciones para Estados Unidos (donde están los mejores datos y un ejercito de los mejores economistas y asistentes de investigación), son muchas veces contradictorias, y en general encuentran que el salario mínimo no tiene efectos en empleo, o incluso tiene efectos positivos!  (el estudio mas conocido es este, en que un aumento del 20% del salario mínimo por hora en locales fast food incrementó el empleo en 13%)

Yendo un poco más allá de la simplista visión de equilibrio parcial, hay varios argumentos que explican que aumentos del salario mínimo en realidad pueden generar incrementos en el empleo. Uno muy reciente e innovador es de un profesor de Berkeley que invoca la teoría del "big push": al tener mayores salarios, los trabajadores demandan más y por lo tanto generan mayor producción interna, creado un aumento en empleo (muy creíble evidencia para Indonesia es presentada). 

Esta claro que los efectos del salario mínimo no son obvios, y son difíciles de estimar empíricamente. Pero quizás la pregunta relevante es.... es el salario mínimo realmente importante? En todo el mundo es una política que general gran debate y polarizaciones entre sectores. Como indicador, el piso legal de salarios tiene la virtud de ser fácil de entender para todos (y también de prestarse para malabarismo de cifras por cualquiera), pero su impacto real es muy discutible. 

Los que piensan que al aumentarlo automáticamente incrementa el bienestar de los más pobres pecan de inocentes. En particular, dada la informalidad en ciertos sectores y las varias triquiñuelas legales de los empresarios chilenos, es posible que mayores salarios de piso simplemente impliquen empeoramiento de las condiciones de trabajo, ya sea sin contratos formales, con más "horas extra voluntarias" o "favorcitos al jefe". Si bien este estudio dice que no hay efectos en cuanto a la formalidad del empleo en Chile, los resultados no son totalmente robustos. Sin duda es tema para mas investigación (pero de la seria, no la de la Ministra....)

Bueno o malo? ético o inmoral? es muy difícil saber si alzas del salario mínimo realmente mejoran la calidad de vida de los trabajadores peor remunerados..... al final, creo que lo relevante en Chile es no desviarse de los debates sociales centrales: leyes laborales que se cumplan, estándares de seguridad y calidad en el trabajo, pensiones dignas, etc... hay que ir más allá de un numerito que no es muy (ir)relevante. 



Tuesday, July 10, 2012

A new player in the international development community? Chile as an emerging donor


Last week I assisted to ENCUENTROS 2012, a conference for Chilean scholars working abroad in different disciplines.  For first time social sciences were included, and I have to say that the level of the presentations was generally very good, both from Chilean and international speakers (including Fosu and Klasen). On the bad side, too much emphasis was giving to things like networking and entrepreneurship, leaving aside some other important issues. 

My presentation was about a policy paper I am writing with Alexis Guitierrez about Chilean international aid (a draft version can be found here). My compatriots were actually very surprised to hear that Chile is providing ODA, and that at the Latin American level the amount given is not neglectable...  is Chile a new emerging donor? 

The world is experiencing the fall in relevance of the traditional powers and the irruption of emerging countries. One of the topics that have made these countries prominent is the involvement in provision of international aid. The “South-South” collaborations are on the rise. China is the better known case, but the other BRICS countries (Brazil, Russia, India and South Africa) and oil rich Venezuela and Arab countries are also part of the group of emerging donors.

Is Chile part of that group? As happens with most non-DAC  countries, it is not easy to quantify Chile’s foreign aid. No consolidated data exists and many different Government institutions independently undertake international cooperation actions. Collecting data from different sources, we have estimated that total international assistance is on the order of $16.4 million, therefore ODA/GDP is around 0.0075%. This is not only very far from the 0.7% UN target, but it is also well below the contribution of countries with similar levels of income per capita:
Source: Gutierrez and Jaimovich (2012)

Nonetheless, at the regional level Chile’s foreign aid is relatively important. According to SEGIB, in 2010 Chile participated in 5% of the bilateral cooperation projects among Latin-American countries. Given the size of Chilean projects was bigger than the average, the country is the third most important donor (far behind Brazil and Venezuela). The SEGIB also highlights the importance of Chile in the triangular cooperation inside the region, participating in 27 of the 42 projects carried out in 2010.

Most of the ODA provided by Chile is channeled thought contribution to IOs. Roughly 80% of the international aid between 2006 and 2011 is multilateral:
Source: Gutierrez and Jaimovich (2012)

The bilateral aid is mainly provided by the Chilean International Cooperation Agency(AGCI), an agency created in 1990 with the dual mission to act as recipient and donor of foreign assistance. Given the increasing importance of the latter role, the agency was moved from the Ministry of Planning and Cooperation to the Ministry of Foreign Relations in 2005.

AGCI's action is organized into: Triangular Cooperation (with agencies like GIZ, JICA and the WFP) and South-South Cooperation (Horizontal Cooperation), that takes the form of technical assistance and scholarships:
Source: Gutierrez and Jaimovich (2012)

The single most important recipient of Chilean aid is Haiti, followed by Bolivia, Paraguay, El Salvador and Ecuador.

It looks like Chile is an emerging donor... is this good or bad? Chilean society and its politicians need to define what kind of donor the country wants to be: altruistic, opportunistic and extractive? Given there is no public awareness of AGCI's work, this public debate is nonexistent, and the decisions are basically subordinated to the interests of the Ministry of Foreign Relations. Needless to say, there is not such a thing as impact evaluation of the projects, and the transparency in terms of project assignment is not exactly pristine.

Even full member of the OECD since 2010, Chile has kept its status as solely an observer of the DAC and has made no progresses towards full membership. The reason for this attitude is not clear, but there are elements to interpret it not as a strategic behavior, but probably more related to lack of capacity and budget of AGCI and other government organisms. Even tough, it might be possible that ODA is not reported to DAC in order to still be eligible for some programs in which official donors are not considered or simple because the flexibility of non-DAC donors is preferred.

The major challenges for AGCI are the adaptation to the new scenario for international cooperation, with the disappearance of the received foreign development assistance and the potential increasing role of Chile as emerging donor. AGCI has to strength its institutional capacity oriented towards the provision of international assistance in many ways. In the short and medium term: improve the report of aid statistics using international standards, transparency in the use of resources and project assignation, public awareness of activities, integration to international instances. In the long term: implement project impact evaluation, adaptation to the procyclicality of budget allocation and broader independence of the decision making process from the Ministry of Foreign Affairs.

To sum up, if Chile wants to play in the league of developed nations, its foreign assistance strategy needs to be defined, and it is better to start early enough and learn from the experiences of the 60 years of attempts from the international development community to improve people’s lives in other countries.

Wednesday, June 13, 2012

Monday, May 21, 2012

If people don't go to the lab, the lab goes to the people

While it has been more than a decade since behavioral experiments are conducted on the field in developing countries, it is usually very difficult to find established facilities for this kind of research. This is why the BUSARA CENTER FOR BEHAVIORAL ECONOMICS is a very welcomed contribution.

The Center is a state-of-the-art facility for experimental studies in behavioral economics located right outside the Kibera slums in Nairobi. They have a pool of participants from the area, that are recruited via SMS and then receive the payments using MPesa (then dismissing the problem of lack of credibly in the experimenter). 

Busara seems to be very open to receive researchers interested in using their facilities, and the contact with them can be via email or even facebook.


ht: poverty-action

RELATED POSTS 
Only Marshallian inefficiency? How a framed field experiment helps to identify another cause of the inefficiency of sharecropping contracts. 

Friday, May 11, 2012

Chapter II : Is Jeffrey Sachs in a highway to hell?

The road to hell is paved with good intentions....

Now he is really loosing completely his scientific reputation. The recently published "evaluation" of the MVP  has mistakes that are high school level.

Here Gabriel Demombynes shows a very crude analysis, including links to other (even more severe) critiques. This is a complement to this paper that already revealed many of the problems.

At least we have good material to teach our students how not do an evaluation.




RELATED POSTS
Is Jeffrey Sachs in a highway to hell?

Monday, April 30, 2012

Sudans' economic war?

Some interesting recent analyses of the correlation between economic issues and the conflict between the Sudans (and my causal interpretation of each one):
  1. The $7bn black hole. (causality: war for money)
  2. A distraction from the current financial situation.   (no money -> public discontent -> war as excuse)
  3. Make trade no war. (money for war: no business with the enemy)
  4. The primary issue is about oil (war for money)
  5. Development and Conflict (reverse causality, with serious official statistical juggling)  
  6. Love for the bomb  (money for bombs)
  7. A war neither can afford (war for money... but no money for war)


    Monday, April 23, 2012

    Facts about Juba

    This post starts a summary of reflexions about the 10 days I stayed in Juba at the beginning of April 2012, with a group of fact finders from Goethe Frankfurt University. The facts I will present are personal views and reflect experiences just before the battle of Heglig, when the causes of the fire in Konyo Konyo market were more important in the local news than a possible new confrontation with the North. 


     JUBA AS A FOREIGN TRAVELER 


    Fact 1: Juba is Nice

    There is quite a lot of evidence related to an increase of pro-social behavior in people affected by war (like here and here, for the opposite see here). I don't know if this is the reason, or is just that “Jubaneses” (I couldn’t really find the proper demonym) are nice, but I was amazed by how friendly and respectful is most of the people there (both locals and recent immigrants). And it was not just a funky behavior towards white men. Khawajas are just one more in the chaotic mosaic of different local tribes, Arabs, East Africans, Chinese, etc...

    Of course, the city will not be nice to every eye. While the 47° that we were facing those days, right before the beginning of the rainy season, seem to calm down city’s spirit during the day, as soon as the sun starts setting, aliveness and chaos take control of the streets, particularly the days that electricity will just start working at 19:00. Is the moment for the electric haircut machines, the sound systems and the cold beers. No traffic lights yet, but many streets lights instead. And Juba’s traffic is something. I am glad I was raised in the wild streets of Santiago de Chile, always ready to play torero with the cars. No even talk of boda-bodas. I am not sure if the licensing system was really working, but SENKE daredevils were all around.

    Indeed, traffic accidents were always at the top of the most important topics in the security assessments that we received. While various other parts of the country are under strict travel warning, in Juba boda-accidents, petty crime and crocodiles in the Nile were more of a concern than landmines, LRA or tribal clashes. I never felt less safe than in many cities I have been before (including various neighborhoods of Washington DC).

    Yes, many expats were in some nice “safety heavens”. But we were staying besides University of Juba, not too close to the more globalized spots of the city. Here it was more a mix of students, university personnel and immigrants from neighboring countries. And this spot of the city was the restless corner of the days we stayed: a very Latin-American style students movement was the matter in public order. But still it was quite a sparkling nightlife in the area, and University Staff Club was never running out of Tuskers.

    At least in my personal view, Juba is now a nice city.

    Fact 2: Juba is Booming

    You do not need any training in economics to realize that Juba is booming! Not sure if the title of the fastest growing city in Africa is correct, but it will not be a surprise.

    Clearly the construction boom is not going up... it is going aside. While few red bricked buildings are on the way to be built, the construction-mania has rearly more than two or three floors. Sometimes taking the form of a fancy presidential palace, the headquerters of an NGO, a new electronics shop, a well equipped garage for Toyotas or a SENKE emergency room... Juba is spreading!

    When we were landing in our Ethiopian from Addis, and I was used to the desertic landscape of the 2 hours ride, the sudden excitement of the sight of the famous Nile from the sky was more powerful than my aerial search for Juba. The lack of high buildings makes it difficult to see the city in advance, and I just had time to notice a mixture of tukuls and shacks… I thought it was a village near Juba…. but then I realized that entire new neighborhood-villages are being raised recently inside the city.

    It is not clear the current number of inhabitants, but we heard estimates ranging from 250,000 to one million... but is clear that the population has at least doubled in the last 6 years.  

    The frantic boom was confirmed with the hundreds of trucks from Uganda, Kenya, Ethiopia and the UN, driving along with the 4WDs and SUVs, from international organizations (I am now familiar with all the logos!) and  lucky locals. A mix of international aid and private development, not necessarily well tuned together. 

    There was money, there was oil… but now there is not anymore. It is to be seen if the peace dividend will survive austerity measures  (and if, hopefully, peace itself will remains).

     Fact 3: Juba is East Africa

    For anyone following even sporadically the North-South Sudan conflict, it must be clear that a very important part of the complicated equation of war is Arab world versus Sub-Saharan Africa. And when you are in Juba is clear, you are in East Africa.

    I am not so familiar with the region, but Tanzanian textiles, Kenyan beers, Ethiopian food, Eritrean bars and Ugandan music were at home.  And the many recent migrants from these neighbor countries as well.

    Even the language is evolving towards the Southeast. Juba Arabic is what people talks, but the language of Shakespeare is becoming very prominent (and was chosen as official language), and it is not too adventurous too say it will be the main language in a decade or less.

    If cultural integration has been important to develop this sense of identity, it is likely that economic integration will make it even stronger. The road to Kampala is getting a lot better, and many new goods are coming from this way. And if the Lamu corridor becomes a reality, the future will look at the East more than ever.

    Also in sports, like football and  basketball , cheering and hopes are more in the South than anywhere else.



    RELATED POSTS
    On the way to Juba 

    Tuesday, April 17, 2012

    Biographical Dictionary of Africans: the real one!

    "This is an historic event since it is the first dictionary of its kind written by one African."
    And I can give faith that this is true! even I haven't met the author personally, Jean I.N. KANYARWUNGA, I know his wife from the Graduate Institute in Geneva, and the "seventeen years of strenuous research" are absolutely true. I have also read his semi-fictional book L'Envers du parchemin.

    In a continent that needs to write its own history, the appearance of this 832 pages dictionary with more than 2,500 biographies is a great contribution.
    Some have made history, others were victims, many are his creatures.
    They are conquerors, politicians, writers, filmmakers, actors, athletes, musicians, artists, religious, saints, popes or humble citizens, whose fates are confused with that of their region, their country and their continent.
    Qu’ils méritent le piédestal ou le gibet de l’Histoire, qu’on les adule ou qu’on les abhorre, ils restent, au-delà de toute controverse, les repères incontournables de la mémoire du continent et constituent, à l’instar des monuments et/ou des pyramides, son legs au patrimoine culturel universel. (French post here)

    I understand the dictionary is just available in French in the meantime (only for 40,00 € !), but it seems that at some point will be also available in English.



    Thursday, April 12, 2012

    Only Marshallian inefficiency? How a framed field experiment helps to identify another cause of the inefficiency of sharecropping contracts.

    This post continues a series of notes from guest bloggers about papers presented at the CSAE conference 2012. Niels Kemper (University of Mannheim) summarizes the results of his paper about the effects of different type of contracts on real-effort tasks performance 


        From the classical economists such as Adam Smith, John Stuart Mill and Alfred Marshall up to the day, economists are interested in the efficiency of contractual land arrangements such as sharecropping and fixed-rent tenancy, of which the former is believed to induce less effort as compared to the latter, because tenants receive only a fraction of their marginal product of labor under sharecropping (the so-called Marshallian inefficiency). Given the prevalence of small-scale agriculture in developing countries, the mode of contracting land and labor and thus the claim to yields from land are directly linked to welfare and poverty.

    Empirically, this is commonly tested by comparing input and output intensities on sharecropped and rented plots in survey data. However, empirical analysis based on survey data may be confounded due to factors which are hard to observe and thus to measure (such as individual risk attitudes, effort, ability etc.). Taking a framed field experimental approach allows varying contracts independently of all unobserved factors and therefore to elicit the pure incentive effect of contracts. Further, the design of the experiment allows us to identify another cause for the inefficiency of sharecropping.

    Measuring the incentive effects of typical agricultural contracts, the experiment employs a real-effort task resembling sorting processes that occur in agricultural production. Given that the economy in rural Ethiopia is relatively abundant in labor and relatively scarce in capital, these sorting processes are quite common. The real-effort task involves the sorting of haricot beans of different colors in a given time period. The experiment consists of 25 sessions with 20 participants each. Four contracts were randomly assigned to sessions: Wage, sharecropping, fixed-rent and ownership. The payout of the participants depended on the terms specified in the respective contract and the participant’s real-effort output during the experiment (except for the wage treatment in which the payout was held fixed for all levels of real-effort output).


    The table below contains the central findings of the paper, regressing real-effort output on the sharecropping (C2), fixed rent (C3) and ownership contract (C4) (the wage contract is dropped as a reference and therefore all coefficients have to be interpreted relative to the wage contract). Column (1), for instance, states that real-effort output is 2.8 percent lower in the sharecropping treatment than, 9,6 percent higher in the rent treatment and 7.1 percent higher in the owner contract (in all three cases as compared to the wage contract).



    In line with basic economic theory, rent and owner contracts induce the highest real-effort. But surprisingly, real-effort output from sharecropping and wage contracts cannot be statistically distinguished. If sharecropping was only Marshallian inefficienct, it should induce more effort than the wage contract (but less effort than rent and owner contract). This implies that there must be an additional reason for the inefficiency of sharecropping.

    Semi-structured interviews (carried out after the experiment) imply discontent with real life sharecropping contracts among participants across almost all study sites. To quote a typical answer:
    Sharecropping is not my first preference, but the land owners force this land arrangement upon me. Because I only have limited plot size I have to accept sharecropping. (A Farmer interviewed in the Kebele Yetejan)
    Regarding this, further data analysis shows that the subgroup of real life sharecroppers behaves different from non-sharecroppers in the experiment (in particular, they exercise less effort under the sharecropping and more effort under the rent contract). Real life discontent with sharecropping contracts spills over into the experiment and therefore presents an efficiency loss which comes in addition to the Marshallian inefficiency.

    Niels Kemper is a postdoctoral researcher at the Chair of Econometrics, University of Mannheim, Germany.

    Article
    Kemper, N. (2012). Field experimental evidence on the incentive effects of agricultural contracts on real-effort output in Ethiopia. Presented at the CSAE Conference 2012: Economic Development in Africa.



    Tuesday, April 10, 2012

    \m/ Metal for development \m/




    It is clear that the number of metal bands is highly correlated with income per capita. For me the causality is very clear: listening metal makes you more intelligent and productive. Anyone disagrees?

    Chile has the highest index of metal bands per capita in Latin-America, and one of the highest in the world, at levels comparable to Germany. Now we can really claim to be a developed country!

    Thursday, April 5, 2012

    Contagious FTAs

    Even this is not really a development paper, I think I received the very good news of the acceptance of my work on contagious Free Trade Agreements with Richard Baldwin in the Journal of International Economics a lot more as a development than as a trade economist: shouting and jumping in a Internet cafe in Juba, and then toasting with Black Label at the Ethiopian bar besides (6 South Sudanese pounds for the double shot). After 4 years of hard work with that paper, not even in my craziest dreams I could have imagined a better setting!

    In the paper we show that even when countries might not have incentives to open to trade using FTAs, they will sign defensive FTAs to reduce the discrimination created by agreements of their neighbors. Using an index gleaned from Spatial Econometrics techniques, we show empirical evidence for the Domino Theory of regionalism, made famous by Richard in the early 90s.




    Saturday, March 31, 2012

    Boiling potatoes in South Sudan

    "You cannot boil potatoes without a cover" is the advise that a senior government officer from South Sudan gave us. She was referring to the way we were planning our collaboration with University of Juba. Short training courses are very unlikely to help students, because they are not adequately prepared from the basic education received in their respective bachelors... this is not coming as a surprise, but definitely is the concept defining our visit to Juba.

    During the whole week, the university was closed, given clashed between students that started during a football match and that ended with the intervention of the police and SPLA. This was a very bad timing for us in terms of making difficult to meet professors and visit the campus, but it is has been very interesting in providing us with direct evidence of the real problems faced at the university. It is not just about the ethnic clashes that partially motivated the riots, but also about the lack of students ID, accommodations, teaching facilities and even enough food for them. Again, this is not coming as a surprise.

    What it is more a surprise is the fact that the Government has recently founded 3 new universities in other states, and that some of the good staff from U.of Juba is leaving to them. Why to do that? It comes as a political measure, but it is just boiling even more raw potatoes, given regional universities have even lower capacity and infrastructure. Most of them are updated vocational schools. Even worst, the government was aiming to create even more universities, but luckily the minister of higher education (a very bright geologist that switched to sociology given his experiences in the civil war) stopped this (for the moment) trying to emphasize the improvement of the existent institutions. In the meantime, no technical schools have been created and most of the technicians participating in the impressive growth of Juba are foreigners.

    Even U. of Juba was definitely reallocated from Khartoum just last year, leaving behind most of their assets and an important part of the staff, still some of the professors are very well prepared and have the willingness to provide good quality education... I hope we will be able to help them in the process!