What makes some countries urbanize without industrializing?

…. Kuwait, Gabon, Saudi Arabia, Libya, Algeria, Angola and Nigeria are as urbanized as Uruguay, Taiwan, South Korea, Mexico, Malaysia, South Africa and China respectively, and yet the former countries have not industrialized to the same extent as the latter. This raises several questions. Where do the cities in Angola, Nigeria, and the others come from? Why have so many cities in today’s developing world never been factory cities, in stark contrast to the historical experience of today’s developed countries? If these cities have a different origin, does it matter for economic development?

We show that conditional on income per capita, urbanization rates are unrelated to the share of resource exports in GDP or the share of manufacturing and services in GDP. Urbanization is a function of income per capita across all countries.

However, the composition of urban employment differs starkly between resource-exporters and non-exporters, holding constant income levels and urbanization rates. We use IPUMS census micro-data, labor force surveys, and household survey data to recreate the sectoral composition of urban areas for a sub-sample of 88 countries. Using this novel data set, we find that cities in resource-exporting countries are what we term “consumption cities”, with a larger fraction of workers in non-tradable services such as commerce and transportation or personal and government services.1 Cities in countries that do not export significant resources, on the other hand, appear to be “production cities”, with more workers in industrial sectors such as manufacturing or in tradable services like finance.

Source: The Economist Newspaper

Source: The Economist Newspaper

That is Douglas Gollin and co-authors in a working paper on urbanization with and without industrialization. The authors also find that ceteris paribus “consumption cities” also tend to be marked by higher rates of poverty and greater shares of populations living in slums. In short, and to paraphrase the authors, consumption cities of resource exporters are not as welfare-improving as production cities of non-exporters.

This should worry policymakers across the Continent. Africa is urbanizing fast (see image), but without the benefits of mass job creation. Indeed UN Habitat’s 2014 State of African Cities report warns that urbanization in Africa lacks the potential “to deliver on the aspirations of broad based human development and prosperity for all.” The continent’s “consumption cities” will have significant impact on state economies. Increased imports of consumer goods (and food) will put pressure on currencies, with inflationary consequences (Africa imports $81b worth of agricultural produce annually). Tending to the urban sector will likely lead to further taxation of the rural sector a la Bates.

That said, demography might provide a way out. Africa’s population is also expected to balloon over the next five decades. That might just create big enough domestic markets to make it worthwhile for firms to consider locating their manufacturing bases on the continent. Increases in labor costs in east Asia are therefore a welcome trend.

Things to remember as you volunteer or conduct research in a developing country this summer

Rafia Zakaria, on Al Jazeera America, writes:

My friend Jack likes to tell his favorite story about a summer he spent volunteering in Colombia. He recounts that story anytime he’s handed the opportunity, at parties, lunch meetings and airports. He highlights varying facets of the story on different occasions — the snake he found in his tent, his camaraderie with the locals and his skills at haggling. The message to his audience is clear: I chose hardship and survived it.

If designer clothes and fancy cars signal material status, his story of a deliberate embrace of poverty and its discomforts signals superiority of character. As summer looms, many Americans — college students, retirees and others who stand at the cusp of life changes — will make similar choices in search of transformational experiences. An industry exists to make these easier to make: the voluntourism business.

As admirably altruistic as it sounds, the problem with voluntourism is its singular focus on the volunteer’s quest for experience, as opposed to the recipient community’s actual needs.

Zakaria rightly adds that:

Despite its flaws, the educational aspect of voluntourism’s cross-cultural exchange must be saved, made better instead of being rejected completely.

As a volunteer or an academic researcher this summer, here are a few things you can do out of respect for the people you work with (especially if you fit standard definitions of “expat”). These points might seem obvious, but even seasoned professionals need a reminder every now and then.

  • Be respectful: I am often shocked at how some otherwise reasonable academics and college students acquire an aura of arrogant omnipotence the second they land in a developing country. Being accorded high status on account of foreignness can do real damage, it turns out. Do not feed off of this. Maintain a level head, and respect those that you deal with. It is for your own good. You will never be able to completely transform the societies you work in, or study. Be humble. Think incremental change. Remember that your presence is temporary. Do not exploit the goodwill of your hosts.
  • Work with the grain: Do not seek to disrupt the way people do things. You can offer advice and introduce people in the villages you visit to new ideas. But do not imagine yourself to be the great change agent. Because you are not. Sustainable change must be anchored within local power dynamics. Do not create parallel systems. I reiterate, whatever change you introduce must be anchored in existing systems. That is the only way the change will be incentive-compatible with the interests of those who hold the power to completely sabotage everything you do. You will most certainly fail if you ignore this reality.

    Africa_843

    This is not cool

  • Keep a diary: You will be in a lot of situations in which you can’t say exactly what you think (and shouldn’t). So keep a diary, and have it be the place where you jot down your naive and disrespectful random thoughts (we all have these thoughts). Review these diary entries once in a while. See if your entries change as you get to know your hosts better. If they don’t, find out what’s missing.
  • Lastly, do not plaster your social media profile wall-to-wall with images of anonymous people in various states of desperation. Nothing says that you are a jerk like having images of anonymous kids with torn clothes milling around you on your Facebook page. Whatever images you post, the world will know whether these were your real friends or just props to advertise to the world that you went to Nicaragua or Namibia. Do not post pictures of people whose names you don’t know, or of children whose parents did not give you permission to do so. Please, do not be that person.

Also, do not forget to learn. Learn and learn some more. And share with your hosts as much as you can.

Neopatrimonialism & Political Economy in Africa

[t]he monotonic mapping of some aspects of neopatrimonialism into a definite economic policy, let alone an outcome, is based more on a leap of faith than on the existence of a tightly knit algorithm or, as advocates of the neopatriomonial approach suggest, on the impeccable logic of neopatrimonialism. The claim that neopatrimonialism provides the microeconomic foundations with which to understand the macroprocesses of Africa is unwarranted. As John Maynard Keynes argued, macroeconomy is not reducible to microfoundations. There are simply no nontrivial algorithms that will establish a one-to-one correlation between microeconomic behavior and macroeconomic outcomes. Similarly, there is simply no way that the logic accounting for the macroeconomic problems in Africa and their possible solutions can be derived from the myriad communities in the region, regardless of claims about the logic of neopatrimonialism.

…. The analytical template forged by the neopatrimonialism school has had the effect of flattening the African political and economic landscape—often rendering monochromatic the many colorful and varied characters who have taken the African political stage over the last half century. This flattening extends beyond space to time as well. There is simply no sense of conjuncture or periodization within the analysis. By neglecting the cross-sectional and longitudinal variance of the African experience, the neopatrimonialist view provides an impoverished understanding of the complexities of the continent. It also oversimplifies the many contradictions of the continent. Adverbial caveats do not diminish the essentially leveling effect of the term “neopatrimonial.” What ultimately results is not a rich tapestry of case studies but rather reportages of one damned country after another.

That is Thandika Mkandawire of LSE writing on the concept of neopatrimonialism as applied to research on Africa over the last half-century. The paper is forthcoming in World Politcs. It is destined to be required reading in Comparative Politics and Comparative Political Economy classes. I highly recommend adding it to your summer reading list.

Is There Room for Case Studies in Development Practice?

Amid the current much-needed revolution in (quantitative) evidence-driven development practice, is there room for case studies?

Michael Woolcock at the Bank says yes:

The frequency and sophistication with which case studies are deployed by social scientists has greatly expanded in recent years. The goal now is not merely to document or describe, but to diagnose, explain, interpret, and inform a basis for action. Professional schools across the disciplines – from medicine and engineering to business and public policy – now routinely use ‘the case method’ not only to teach but to generate practical knowledge.

As an example, Woolcock cites a report with case studies of successes achieved in the Ministries of Finance and Education in The Gambia (I should add, despite Yahya Jammeh):

Despite facing formidable political, economic, and capacity challenges, The Gambia has recorded sizable advances in the education sector in a relatively short time frame. Since 2000, enrollment has more than doubled in secondary schools, while the number of students enrolled in basic education has increased by 40 percent, with notable growth in the madrassas schools. Gender equality and completion rates in basic education have continued to improve across the board and surpass the regional averages. Simultaneously, the number of teachers formally trained and the number of students enrolled in the Teachers’ College has grown considerably since 2005.

Screen Shot 2015-02-25 at 4.30.59 PMThese gains are directly linked to the scaled-up investment in the sector, which has translated into a greater number of schools, larger number of qualified teachers and monitors, and the introduction of innovative programs catering to hard-to-reach groups. In turn, these achievements have been made possible by the organizational and management changes introduced by the Ministry of Basic and Secondary Education (MoBSE) and its ability to remain focused on a small set of goals, report results, and mobilize domestic and external support to realize them, while generating and renewing its leadership cadre. To achieve this, the institution has had to navigate and solve numerous challenges in its internal organization and in the governance environment.

This is how development happens. Specific segments of governments get it right and, with some luck, generate positive spillovers into other departments. In Gambia it is happening in the Ministries of Finance and Education. In Kenya, the Kenya Revenue Authority (KRA) and, to some extent, the Treasury are doing much of the heavy-lifting in the quest to rationalize the Kenyan economy.

On presidential decrees

Nearly all world constitutions grant presidents the power make laws via executive orders and subsidiary legislation at the point of implementation. And this is what happens when presidents exercise the same powers without robust legislative oversight.

Corruption and Punishment

This paper contributes to the growing literature on anti-corruption accountability by comparing individual decision making under different norms and institutions. Employing an experimental methodology, I examine how the propensity to report corruption differs between Northern and Southern Italians, two groups that experience very different levels of corruption in everyday life. Further, the experiment measures behavior under two different institutional environments: a “strict enforcement” condition where reports always result in sanctions against perpetrators, and a “lax enforcement” condition where 50% of reports are ignored. I find no difference in the behavior of Northern and Southern Italians in the lax enforcement condition, but in the strict enforcement condition, Southerners are much more likely to denounce wrongdoing, while the behavior of Northerners remains unchanged. These results demonstrate that exposure to corruption may strengthen accountability norms, but only in the presence of high quality enforcement institutions.

That’s Nan Zhang in a fascinating paper on corruption in Italy.

As recent cases in the New York state legislature, Illinois, and the expense scandals in the UK Parliament demonstrate, the difference between OECD states and the developing world when it comes to corruption is simply about enforcement. It’s not, strictly speaking, because of a fundamental difference between OECD and non-OECD states in the pro-social tendencies of politicians. There are no good politicians or public officials, just properly incentivized ones. Most OECD states have managed to reduce corruption by having a credible deterrent in the form of functional judicial systems. Corrupt people go to jail.

Screen Shot 2015-05-08 at 11.03.49 AMFor instance, over the last 15 years Kenya has seen a surge in the reporting of corruption scandals but to little effect. The most recent scandal to break is one involving the deputy president (pictured above), who allegedly inflated a hospital construction project by Kshs 11b (US $115m!!!) Since no one gets punished, the fear of getting exposed has little deterrence value. It is common knowledge that “everyone” is corrupt and gets away with it. In such an environment, you are a sucker if you are clean.

The obvious lesson here is that it is not enough to set up anti-corruption commissions. What reduces corruption is the credible threat that the corrupt will be punished.

H/T Tiago Peixoto.

On Predatory Investment in Africa’s Extractive Industries

The U.S. military’s African Center for Strategic Studies has a pretty interesting and detailed report on Sam Pa, his group of companies, and involvement in shady deals in the extractive sector in Africa. In Mr. Pa we have got the Hong Kong/Chinese equivalent of the shady Israeli billionaire Dan Gertler who’s playground is mainly the DRC (Global Witness has a thick dossier on Mr. Gertler; See also an FT piece on his partner, Benny Steinmetz, who recently got (figuratively) burned after a too-good-to-be-true deal went sour in Guinea).

Focusing on Mr. Pa and his business network in several African states, the ACSS report examines the networks and (corrupt) practices of the Hong Kong-based 88 Queensway Group. It outlines Mr. Pa’s business strategy as one based on:

Cultivating relationships with high-level government officials in politically isolated resource-rich states through infusions of cash, promises of billions of dollars in infrastructural development, and support for the security sector [….] Starting in Angola in 2003, Queensway has been engaged in the extractive industries in at least nine African countries, including Guinea, Madagascar, Tanzania, and Zimbabwe.

…… In many ways the prototypical predatory investor, Queensway frequently appears in resource-rich states in Africa where it can operate with high levels of opacity. In Angola and Zimbabwe, for example, few details from the contracts pertaining to Queensway’s investments—reportedly worth up to $9 billion in each country—have ever been disclosed to the public. In states where contracts have been unearthed, such as Guinea and Tanzania, the deals were revealed to be flagrantly unfavorable to the citizens of the host country. Having allegedly bribed African government officials and engaged in illicit arms trafficking and diamond smuggling, Queensway’s deals in Africa have often had a disastrous impact on governance.

You can download the full report here.

HT Financial Times

This is why epidemiologists are the most successful development experts of all time

Screen Shot 2015-05-04 at 10.58.53 AM

Courtesy of the ever-awesome xkcd

(And in this particular degree-off the only way physicists can catch up with the biologists is if they make teleportation a reality (I also appreciate the fast trains, btw). I’d really love to be able to be in either Nairobi or Chicago whenever I want to).

H/T Brett