World Bank Aid and Corruption

Here’s the now infamous paper that the World Bank is alleged to have tried to censor, actions that led its Chief Economist Penny Golberg to resign in protest. The paper finds that increases in World Bank aid is correlated with the siphoning of cash to offshore financial centres.

Do elites capture foreign aid? We document that aid disbursements to highly aid dependent countries coincide with sharp increases in bank deposits in offshore financial centers known for bank secrecy and private wealth management, but not in other financial centers. The estimates are not confounded by contemporaneous shocks such as civil conflicts, natural disasters and financial crises, and are robust to instrumenting with predetermined aid commitments. The implied leakage rate is 7.5% at the sample mean and exhibits a strong correlation with the ratio of aid to GDP. Our findings are consistent with aid capture in the most aid-dependent countries.

….In this paper, we study aid diversion by combining quarterly information on aid disbursements from the World Bank (WB) and foreign deposits from the Bank for International Settlements (BIS). The former dataset covers all disbursements made by the World Bank to finance development projects and provide general budget support in its client countries. The latter dataset covers foreign-owned deposits in all significant financial centers, both havens such as Switzerland, Luxembourg, Cayman Islands and Singapore whose legal framework emphasizes secrecy and asset protection and non-havens such as Germany, France and Sweden.Screen Shot 2020-02-18 at 9.22.48 AM

Equipped with this dataset, we study whether aid disbursements trigger money flows to foreign bank accounts. In our main sample comprising the 22 most aid-dependent countries in the world (in terms of WB aid), we document that disbursements of aid coincide, in the same quarter, with significant increases in the value of bank deposits in havens. Specifically, in a quarter where a country receives aid equivalent to 1% of GDP, its deposits in havens increase by 3.4% relative to a country receiving no aid; by contrast, there is no increase in deposits held in non-havens. While other interpretations are possible, these findings are suggestive of aid diversion to private accounts in havens.

The paper finds that project financing (which is arguably easier for the Bank to monitor) is associated with more leakage than general policy financing. The poorest countries see the most leakage.

Our estimates suggest a leakage rate of around 7.5% for the average highly aid-dependent country.

Read the whole thing here.

UPDATE: The World Bank has since agreed to publish the working paper. 

h/t Matt Collin

A Look at Contract Foreign Soldiers Among Gulf States

A number of stories have recently surfaced on how the UAE is coercing Sudanese recruits to fight as mercenaries in Yemen.

This appears to be part of a wider practice for heavy reliance on foreign contract soldiers in the region. In this post, Zoltan Barany provides an insightful summary of the scale of this practice. I must admit I was surprised by some of the stats:

In 2009, 64 percent of the staff at Bahrain’s National Security Agency were non-Bahrainis. Abdulhadi Khalaf, the eminent Bahraini sociologist in exile, claims that “the rank and file in the Bahraini military, police, and security forces consist almost entirelyof foreign recruits,” but he does not name his source. Pakistani personnel make up 18 percent of the Bahraini air force, and altogether 10,000 Pakistani nationals are employed by Bahrain’s coercive apparatus. Problems of conduct among Pakistanis serving in the Bahrain Defense Force are not unknown: in March 2013, for instance, 180 were sacked and deported for violating disciplinary norms.

In Kuwait the number is anywhere between 25-80% of the regular armed forces. In Qatar contract soldiers add up to about 85%. 70% of enlisted men in the UAE are either from Oman or Yemen.

There’s also this angle to the story:

The UAE has employed U.S. companies such as Reflex Responses (founded and operated by Erik Prince, of Blackwater notoriety), which received a $529 million contract to beef up the Emirati military. The forces fighting for the UAE in Yemen include Chadian, Chilean, Colombian, Libyan, Panamanian, Nigerien (from Niger), Somali, Salvadoran, Sudanese, and Ugandan contract soldiers, among others.

Why are Middle Eastern rulers wary of citizen soldiers? You guessed right:

Contract soldiers and foreign advisers play an indispensable role in Gulf armed forces. They have given few headaches to the rulers of the Gulf states—although they have not been problem free, as the Pakistani contingent in Bahrain has demonstrated—and have made essential contributions to their militaries. For civil-military relations in GCC states, reliance on contract soldiers has been generally advantageous, fostering the buildup and professionalization of local armies, allowing the military leadership to shift tasks to contractors that no citizens would want to perform, and recruiting foreigners to complement the fighting forces in Yemen. The recently introduced conscription in Kuwait, Qatar, and the UAE is only marginally germane to the practice of hiring foreign contract soldiers: this policy was implemented primarily for socioeconomic and political, not military, reasons.

Leadership Succession and the Risk of Civil War in Autocratic Europe

This is from an excellent paper by Andrej Kokkonen and Anders Sundell in CPS:

Leadership succession is a perennial source of instability in autocratic regimes. Despite this, it has remained a curiously understudied phenomenon in political science. In this article, we compile a novel and comprehensive dataset on civil war in Europe and combine it with data on the fate of monarchs in 28 states over 800 years to investigate how autocratic succession affected the risk of civil war.

civilwar

Predicted probabilities of civil war onset (p. 455)

Exploiting the natural deaths of monarchs to identify exogenous variation in successions, we find that successions substantially increased the risk of civil war. The risk of succession wars could, however, be mitigated by hereditary succession arrangements (i.e., primogeniture— the principle of letting the oldest son inherit the throne). When hereditary monarchies replaced elective monarchies in Europe, succession wars declined drastically. Our results point to the importance of the succession, and the institutions governing it, for political stability in autocratic regimes.

There are important lessons here, too, for young democracies. The paper is a reminder that the responsible thing to do while promoting electoral competition in young democracies is to also invest in the institutional mechanisms that facilitate the peaceful conduct of elections and that enforce the outcome of elections.

Read the whole paper here.

A Kenyan slum cartel commandeered a World Bank electrification project

The Standard reports:

Kenya Power yesterday dismantled an illegal power selling racket deep inside a Nairobi slum, exposing how a Sh300 million World Bank-backed slum electrification project was taken over by rogue businessmen.

kplcIn 2016, as part of Kenya’s electricity expansion project, the World Bank’s Global Partnership Output-Based Aid (GPOBA) partnered with Kenya Power to roll out the slum electrification programme aimed at subsidising the cost of electricity to low-income earners and ending illegal connections.

At one of the sites, 200 KVA ground-mounted transformer had been enclosed in a small stonewalled building from where illegal connections originated. The transformer, which Kenya Power impounded, was next to a six-storey flat that got its supply from it. The rest was supplied to dozens of iron sheet-walled houses and a myriad of businesses. The disconnection of the transformer left dozens of residents without power. The power supply is known as “sambaza” and residents said they paid between Sh200 and Sh700 per month to people they described as “agents.”

Here is the World Bank’s take on its Kenya GPOBA slum electrification project (from 2016). The project had significant political and corruption risk exposure from the start:

The project faced initial implementation challenges. After the project commenced, the average cost of each connection increased to around $900 due to the inflation of input costs. In order to adjust to this increase, GPOBA raised its subsidy from $75 to $125 per connection; IDA and KPLC also increased their subsidies to $250 and $510 respectively. The connection target was revised from 66,000 households to 40,000. The disbursement of subsidies was amended from the original two-tranche schedule to a one-time payment triggered by the verification of working connections with pre-paid meters. Another challenge was that slum residents in certain areas were reluctant to switch to legal connections due to issues of trust, payment barriers, and fear of reprisals from local cartels.

To address this issue, KPLC prepared an implementation acceleration plan, a two-track approach differentiating between those slums with rampant illegal connections and strong cartel presence, and informal settlements designated under the World Bank’s Kenya Informal Settlement Improvement Project. In the informal settlements, KPLC prepared for infrastructure improvements; in the slums where residents were reluctant to convert to legal connections, KPLC used a community supportive approach. Their outreach involved strengthening communication with residents through collaboration with youth groups, civil society organizations, and social scientists, and preparation of educational materials and contact points, such as kiosks.

It took more than three years for KPLC (and the World Bank) to act against the said slum cartels, despite the Bank’s own report from 2016 highlighting this as a “challenge” to project implementation.

I couldn’t easily find any World Bank project reviews in the intervening years. If anyone has pointers let me know.

Africa-China Fact of the Month

This is from the China-Africa Project:

In purely economic terms, China matters a LOT to Africa but Africa is effectively meaningless to China. Last year, China did more than $4.14 trillion in total global trade. So that means Africa represents just 4.8% of China’s global trade balance, effectively a rounding error for the world’s second-largest economy.

For some additional context, consider that China does more trade with just Germany ($225.7 billion)  and about the same with Australia ($194.6 billion) than it does with all of Africa.

More on this here.

 

Fiscal capacity in African states

This is from The Economist:

Government revenues average about 17% of GDP in sub-Saharan Africa, according to the IMF. Nigeria has more than 300 times as many people as Luxembourg, but collects less tax. If Ethiopia shared out its tax revenues equally, each citizen would get around $80 a year. The government of the Democratic Republic of Congo is so penurious that its annual health spending per person could not buy a copy of this newspaper.

… Since the 1980s governments have followed an IMF-inspired recipe: slashing trade taxes, reducing top rates on personal and corporate income, and embracing value-added tax. Data from the OECD for 26 African countries show that over half of their tax revenues come from taxes on goods and services. Only a quarter comes from personal income tax and social-security contributions (about the same as in Latin America, but much less than in the rich world). From 2008 to 2017 the ratio of tax receipts to GDP rose by 1.5 percentage points, but in many countries this was offset by falls in non-tax revenues, such as fines, rents and royalties from resource extraction.

Nigeria, Africa’s biggest economy, collects less than 10% of GDP in taxes.

Of course taxation shouldn’t be an end in itself. It must be accompanied with effective provision of public goods and services. Overall, weak state capacity is the most significant barrier to both political and economic development on the Continent.

Read the whole thing here.

What’s really driving African Students’ enrollment in foreign universities?

The rise in enrollment of African students at non-African universities continues to be a topic of interest in the news media. Much of the discussion presently frames the emerging trends within the geopolitical competition between the West and China and Russia.

Consider this take from the FT on African students in Russia:

Desree is one of 334,000 foreign students enrolled in Russian universities, according to government figures, a cohort that has more than doubled since 2010 as part of a push by Moscow to ramp up a policy that served as an instrument of soft power during the cold war. Russia is vying with Germany and France to be the world’s sixth most popular destination for international students and the second most popular non-English-speaking country after China.

…. Russian universities are teaching 17,000 students from African countries this academic year, up from 6,700 just eight years ago, President Vladimir Putin said at a conference dedicated to Moscow’s African relations in October. Four thousand are supported by scholarships provided by the Russian taxpayer.

Or this on China:

In 2003, less than 2,000 African international students were calling China home, yet a mere thirteen years later, this number had ballooned to around 60,000; a twenty-six fold increase. If one takes 2000 as the starting point, 60,000 represents a forty-four fold increase. As a result, “proportionally, more African students are coming to China each year than students from anywhere in the world.” Whereas the United States leads in raw numbers, with over a million international students compared to less than half that number in China, fully half of all foreign students in the U.S come from just two countries: China and India. In comparison, over sixty African and Asian countries send more students to China than the United States.

While there are certainly incentives (such as scholarships from home or host governments) that push or pull students towards foreign universities, that does not appear to explain all of the surge in African student enrollment abroad. Even within Africa, tertiary enrollment has surged over the last few years. According to The Economist, enrollment in African institutions of higher learning has doubled since 2000 and is projected to grow at an increasing rate into the near future:

In recent decades millions of young people like Mr Bahati have swelled the number of students in sub-Saharan Africa. Today 8m are in tertiary education, a term that includes vocational colleges and universities. That is about 9% of young people—more than double the share in 2000 (4%), but far lower than in other regions (see chart). In South Asia the share is 25%, in Latin America and the Caribbean, 51%.

Both the number and share of young people in tertiary education in sub-Saharan Africa will keep growing. The region has about 90m people aged 20-24, a figure projected to double over the next 30 years. Whereas 42% of that age group had completed secondary school in 2012, 59% are forecast to do so by 2030. If African countries are to meet the aspirations of educated young people, they must ensure there are opportunities for further study.

In other words, the observed rise in African enrollment in universities in China, Russia, and elsewhere could be largely due to this unmet excess demand in the region. A look at African enrollment in the US (which has better data and where enrollment has trended upward since 2012) further supports this claim. African enrollment in US universities appear to rise and fall with changes in the economic situation on the Continent (see figures below). Interestingly, there appears to be no lag in the correlation, suggesting that economic conditions largely impact households’ ability to fund their children’s studies abroad (or preparation for the same back home); as opposed to say some structural public under-investment in education during bad economic times. enrollmentincome

In sum, the geopolitical machinations of Beijing and Moscow are only a small part of the story here. The bigger story is the overall increase in demand for higher learning in Africa — driven in no small part by increased primary and secondary enrollment and rising incomes — that is not being met by African universities.

 

These results raise the possibility that correlations between linguistic features and survey responses are actually spurious.

This is from a paper by Tom Pepinsky:

Whorfian socioeconomics is an emerging interdisciplinary field of study that holds that linguistic structures explain differences in beliefs, values, and opinions across communities. Its core empirical strategy is to document a correlation between the presence or absence of a linguistic feature in a survey respondent’s language, and her/his responses to survey questions. This essay demonstrates — using the universe of linguistic features from the World Atlas of Language Structures and a wide array of responses from the World Values Survey — that such an approach produces highly statistically significant correlations in a majority of analyses, irrespective of the theoretical plausibility linking linguistic features to respondent beliefs. These results raise the possibility that correlations between linguistic features and survey responses are actually spurious. The essay concludes by showing how two simple and well-understood statistical fixes can more accurately reflect uncertainty in these analyses, reducing the temptation for analysts to create implausible Whorfian theories to explain spurious linguistic correlations.

Here’s Tom illustrating his point:

This distinction between “VO” languages like German and “OV” languages like Japanese has implications for how language speakers conceptualize social difference and distance. By gram- matically requiring separation between subjects and objects, VO languages lead their speakers to conceptualize the social world in “us-them” terms. Consistent with this prediction, I document a highly statististically significant correlation between speakers of VO languages and nativist preferences (specifically, opposition to hiring immigrants) using over 200,000 respondents to the World Values Survey, covering over one hundred countries across three decades and controlling for a rich set of demographic features. These results contribute to the emerging literature on the linguistic origins of economic and social beliefs, and also suggest that the very languages that we speak affect our conceptualizations of identity and belonging.

The preceding paragraph is satire,1 but it rests on firm empirical evidence, and is a real- istic depiction of the emerging literature on “Whorfian socioeconomics.” Whorfian socioeco- nomics attributes causal effect to language structure in explaining beliefs, values, and opinions…

State Capacity Erosion in Ethiopia

This is from Maggie Fick, reporting for Reuters:

Rahmat Hussein once inspired fear and respect for the watchful eye she cast over her Ethiopian neighborhood, keeping files on residents and recommending who should get a loan or be arrested.

Now she is mocked and ignored.

Her fall – from being the eyes and ears of one of Africa’s most repressive governments to a neighborhood punchline – illustrates how Ethiopia’s once ubiquitous surveillance network has crumbled.

… Stacked on top of Rahmat’s kitchen cabinet in the town of Debark, 470 km (290 miles) north of Addis Ababa, are a dozen bulging folders detailing the lives of 150 neighbors: who has money troubles, who has HIV, who is caring for an orphan and who is hosting a stranger.

One of the consequences of the recent democratic opening in Ethiopia under Prime Minister Abiy Ahmed Ali has been the curtailment of the state’s surveillance apparatus.

selassie.jpg

Emperor Haile Selassie (Credit, CNN)

While this is certainly welcome (there is a reason agents like Ms Hussein inspired fear and respect), it still raises the question of what will replace the state’s reach in Ethiopian society. While oppressive and at times murderous, the autocratic surveillance system was also an important source of the state’s infrastructural power. The EPRDF used it to mobilize Ethiopians for agricultural extension services, registration of births and deaths, immunization campaigns, etc. Throwing the baby out with the birth water could mean that, in the interim, the Ethiopian state will get weaker as it democratizes.

This is already apparent. The weakening of the federal government’s local reach that began in 2015 has over the last two years made it very difficult for the federal government to contain violence in the country’s ethno-states. Beyond the potential rise in violence, continued erosion of state capacity may handicap Ethiopia’s ability to implement its ambitious development agenda.

Can the EPRDF/TPLF state and administrative structure be democratized and turned into a system of developmentalist “revolutionary” self-government? Perhaps.

But all indications are that the centre will respond to the increasingly centrifugal forces in the states with more centralization and top-down imposition of order. Any calm in Oromia will likely be replaced with disquiet in Tigrinya and Somali. Adding to the centre’s challenge is the fact that it will be impossible to reverse the entrenchment of Ethiopia’s federal character (to borrow a Nigerian phrase).

The silver lining in all this is that the nature federation in Ethiopia, including the existence of state-level security forces, provides a structural barrier to a return to extreme forms of top-down autocratic rule like existed under the Derg or the Emperor.

 

The earth might be getting greener

This is from NASA:

greening.png… the greening of the planet over the last two decades represents an increase in leaf area on plants and trees equivalent to the area covered by all the Amazon rainforests. There are now more than two million square miles of extra green leaf area per year, compared to the early 2000s – a 5% increase.

“China and India account for one-third of the greening, but contain only 9% of the planet’s land area covered in vegetation – a surprising finding, considering the general notion of land degradation in populous countries from overexploitation,” said Chi Chen of the Department of Earth and Environment at Boston University, in Massachusetts, and lead author of the study.

China’s outsized contribution to the global greening trend comes in large part (42%) from programs to conserve and expand forests. These were developed in an effort to reduce the effects of soil erosion, air pollution and climate change. Another 32% there – and 82% of the greening seen in India – comes from intensive cultivation of food crops.

H/T Max Roser

World Development symposium on RCTs

World Development has a great collection of short pieces on RCTs.

Here is Martin Ravallion’s submission: 

….practitioners should be aware of the limitations of prioritizing unbiasedness, with RCTs as the a priori tool-of-choice. This is not to question the contributions of the Nobel prize winners. Rather it is a plea for assuring that the “tool-of-choice” should always be the best method for addressing our most pressing knowledge gaps in fighting poverty.

… RCTs are often easier to do with a non-governmental organization (NGO). Academic “randomistas,” looking for local partners, appreciate the attractions of working with a compliant NGO rather than a politically sensitive and demanding government. Thus, the RCT is confined to what NGO’s can do, which is only a subset of what matters to development. Also, the desire to randomize may only allow an unbiased impact estimate for a non-randomly-selected sub-population—the catchment area of the NGO. And the selection process for that sub-sample may be far from clear. Often we do not even know what “universe” is represented by the RCT sample. Again, with heterogeneous impacts, the biased non-RCT may be closer to the truth for the whole population than the RCT, which is (at best) only unbiased for the NGO’s catchment area.

And here is David Mckenzie’s take: 

A key critique of the use of randomized experiments in development economics is that they largely have been used for micro-level interventions that have far less impact on poverty than sustained growth and structural transformation. I make a distinction between two types of policy interventions and the most appropriate research strategy for each. The first are transformative policies like stabilizing monetary policy or moving people from poor to rich countries, which are difficult to do, but where the gains are massive. Here case studies, theoretical introspection, and before-after comparisons will yield “good enough” results. In contrast, there are many policy issues where the choice is far from obvious, and where, even after having experienced the policy, countries or individuals may not know if it has worked. I argue that this second type of policy decision is abundant, and randomized experiments help us to learn from large samples what cannot be simply learnt by doing.

Reasonable people would agree that the question should drive the choice of method, subject to the constraint that we should all strive to stay committed to the important lessons of the credibility revolution.

Beyond the questions about inference, we should also endeavor to address the power imbalances that are part of how we conduct research in low-income states. We want to always increase the likelihood that we will be asking the most important questions in the contexts where we work; and that our findings will be legible to policymakers. Investing in knowing our contexts and the societies we study (and taking people in those societies seriously) is a crucial part of reducing the probability that our research comes off as well-identified instances of navel-gazing.

Finally, what is good for reviewers is seldom useful for policymakers. We could all benefit from a bit more honesty about this fact. Incentives matter.

Read all the excellent submissions to the symposium here.

Why did modern nation-states not emerge in China?

This is from Yuhua Wang (highly recommended):

The collapse of the Chinese state in the early twentieth century was surprising. China was a pioneer in state administration: it established one of the world’s most centralized bureaucracies in 221 BCE, two hundred years before the Roman Empire. In the seventh century, it produced a quarter of the world’s GDP (Maddison 2007, 381) and became the first country to use a civil service examination to recruit bureaucrats…

Why, then, did China suffer a dramatic reversal of fortune, given its early bureaucratic development?

… elites’ level of support for state building depends on the geographic span of their social networks. If they must protect a geographically dispersed network, it is more efficient to support state-strengthening policies. These elites have an encompassing interest (Olson 1982, 48). If they need to protect a geographically concentrated network, it is more efficient to rely on private protection and oppose state strengthening. These elites have a narrow interest (Olson 1982, 48).

China…. As the elites’ social networks became localized, they also fragmented; they found it difficult to organize cross regionally. A fragmented elite contributed to a despotic monarchy because it was easier for the ruler to divide and conquer. Historians have noted the shift to imperial despotism during the Song era, as the emperor’s position vis-à-vis his chief advisors was strengthened (Hartwell 1982, 404–405). The trend further deepened when in the late fourteenth century the founding emperor of the Ming Dynasty abolished the entire upper echelon of his central government and concentrated power securely in his own hands (Hucker 1998, 74–75). This explains the increasing security of Chinese rulers [see image].

The despotic monarchy and the narrow interest elite became a self-enforcing equilibrium: the rulers were secure, while the elite used the state to protect their local interests and enjoyed their autonomy. Yet this arrangement led to the gradual decline of the Chinese state.

There are so many parallels to the challenges to state-building in Africa throughout the piece (many of which were documented by Catherine Boone in the excellent Political Topographies of the African State).

Read the whole thing here.

The Nile has apparently not changed course in 30 million years

How old is the Nile?

… It has been suggested that the Nile in its present path is ~6 million years old, whereas others argue that it may have formed much earlier in geological history. Here we present geological evidence and geodynamic model results that suggest that the Nile drainage has been stable for ~30 million years. We suggest that the Nile’s longevity in essentially the same path is sustained by the persistence of a stable topographic gradient, which in turn is controlled by deeper mantle processes. We propose that a large mantle convection cell beneath the Nile region has controlled topography over the last 30 million years, inducing uplift in the Ethiopian–Yemen Dome and subsidence in the Levant Sea and northern Egypt. We conclude that the drainage system of large rivers and their evolution over time can be sustained by a dynamic topographic gradient.

Apparently, an older Nile flowed through Libya, into the Sirte Rift (see image):

nile… we present geological and geophysical arguments supporting the idea that the Nile has been sustained by a mantle ‘conveyor belt’ operating through most of the Tertiary, with a convective upwelling centred under the Ethiopian highlands and a downwelling under the eastern Mediterranean, creating a topographic gradient that supported the Nile’s course over ~30 Myr. Such a course, which is similar to the present-day one, was likely established in the early Oligocene (30 Ma). Before that, our modelling shows that the drainage pattern was probably directed northwestward and controlled by the rifting process occurring in the Gulf of Sirte.

This indicates that at that time, rivers that drained into the Mediterranean Sea flowed farther to the west, possibly along the Sirte Rift that runs from northwest to southeast, which at that time was actively subsiding and being filled with a thick pile of sediments, indicating the activity of a large continental drainage…

Fascinating stuff. Read the whole paper here. (H/T Charles Onyango-Obbo)

As readers of the blog know, Nile waters are currently the subject of a diplomatic struggle between Ethiopia and Egypt. The US government recently offered to help negotiate a settlement. The parties involved set a January 15, 2020 deadline for negotiations. Stay tuned.

Why has economic growth reduced poverty in some African states but failed in others?

This is from an excellent paper by Rumman Khan, Oliver Morrissey and Paul Mosley:

Between 1990 and 2012, for most of the developing world, poverty has halved or more than halved except in sub-Saharan Africa (SSA). The simple poverty headcount fell from about 60% to 15% in East Asia; 50% to 25% in South Asia; 20% to 10% in Latin America; but only from 57% to under 43% in SSA (Beegle, Christiaensen, Dabalen and Gaddis, 2016: 21- 22). This is despite more than a decade of impressive growth in SSA, averaging 5-6 per cent per year since the late 1990s (Devarajan, 2013: S9). Some countries did (almost) halve poverty, such as Ghana (McKay and Osei-Assibey, 2017) and Uganda (Kakande, 2010), and many achieved significant reductions. In contrast, populous countries such as South Africa and Nigeria, on the available evidence, have not achieved significant poverty reduction.

The authors note that the effects of growth on poverty reduction across Africa has been bimodal. And this is their explanation:

povertyTo explain variation within SSA in poverty reduction, we consider aspects of colonial experience associated with the emergence of differing potential for redistributive policies to emerge after independence. Following the approach of Myint (1976) and others, we classify SSA countries into two groups according to the economic strategies used by the colonial authorities, using pre-independence data on factors such as inequality, land ownership by Europeans and political participation by Africans (the process is detailed in Appendix A, with validation by cluster analysis). In smallholder production economies, African agricultural smallholders had economic and some political participation. In contrast, extractive production economies dominated by foreign-owned mines and large-scale farms fostered the emergence of an elite politics characterised by urban bias and capital-intensive production technologies. During the colonial period African economies became clustered around a bimodal structure, which provided better opportunities to the poor in countries whose production was based on the development of labour-intensive smallholder exports than in countries whose growth strategy was based more on capital-intensive mines and large farms. We then test if the growth elasticity of poverty differs between these two groups of countries, using available (PovcalNet) poverty data since 1985, noting that mean growth rates for the two groups were very similar. The analysis shows that the smallholder group significantly outperformed the extractive group, smallholder experience is a significant predictor of poverty reduction, and inclusion of other potential explanatory variables does not alter the conclusion.

I recommend you read the whole paper (including the very rich appendix).