A Kansas City High Schooler’s Development Questions

I regularly receive emails from readers with all sorts of questions and requests. This one caught my eye:

Hello Dr. Opalo,

My name is [redacted] and I am a senior in high school in Kansas City, MO. I am currently working on an exhibition regarding poverty in sub Saharan Africa. My essential question is: What are the factors that contribute to ongoing poverty in sub Saharan Africa. I was wondering if you would be willing to answer a few questions to assist me in my research.

1. How would you describe the current state of poverty in sub-Saharan Africa?

2. What can be done to solve the feminization of poverty?

3. Is Time Poverty a large factor in ongoing poverty and how can time poverty be solved?

4. How can safety be maintained in sub-Saharan Africa through policy?

5. What can an average American do to help end poverty?

Thank you for your time!

If you have answers to any of these questions, let me know in the comments section. I plan to write back before the student’s exhibition is due…

J. D. Vance’s Hillbilly Elegy and Economic Development

Hillbilly Elegy has been touted as a the guide to understanding Donald J. Trump’s overwhelming support among working class European-Americans.

It also has important lessons for students of development. Take this excerpt, for example:

Despite its reputation, Appalachia – especially northern Alabama and Georgia to South Ohio – has far lower church attendance than the Midwest, parts of the Mountain West, and much of the space between Michigan and Montana. Oddly enough, we think we attend church more than we actually do. In a recent Gallup poll, Southerners and Midwesterners reported the highest rates of church attendance in the country. Yet actual church attendance is much lower in the South.

This pattern of deception has to do with cultural pressure. In southwestern Ohio, where I was born, both the Cincinnati and Dayton metropolitan regions have very low rates of church attendance, about the same as ultra-liberal San Francisco. No one I know in San Francisco would feel ashamed to admit that they don’t go to church (In fact, some of them might feel ashamed to admit that they do.) Ohio is the polar opposite. Even as a kid, I’d lie when people asked if I attended church regularly. According to Gallup, I wasn’t alone in feeling that pressure.

The juxtaposition is jarring: Religious institutions remain a positive force in people’s lives, but in a part of the country slammed by the decline of manufacturing, joblessness, addiction, and broken homes, church attendance has fallen off. Dad’s church offered something desperately needed by people like me. For alcoholics, it gave them community of support… For expectant mothers, it offered a free home with job training and parenting classes. When someone needed a job, church friends could either provide one or make introductions.

This is not a political book. Instead, it is simply a powerful narration of a story that is often ignored: that America has millions of poor European-Americans, a good number of whom feel economically and culturally isolated from the public sphere. Vance suggests that this feeling of isolation may have been rendered more acute by the ongoing erosion of the idea that European descent ought to be an automatic ticket to material stability and high social status.

I read this book hoping to get an insight into Hillbilly politics, but the key lesson that I came out with is that people organize out of poverty.

Atomization is disorienting. Stable homes, communities, and well-ordered societies make a huge difference for material outcomes from generation to generation.

History teaches us that the only means of inter-generational persistence of material advancement is through stable and resilient organizations — family units, churches, investment clubs, firms, capable and responsive governments, etc.

I highly recommend the book, whether you are interested in American politics or not.

Population trends and the potential for a demographic dividend in Africa

Bloom, Kuhn, and Prettner write:

We assess Africa’s prospects for enjoying a demographic dividend. While fertility rates and dependency ratios in Africa remain high, they have started to decline. According to UN projections, they will fall further in the coming decades such that by the mid-21st century the ratio of the working-age to dependent population will be greater than in Asia, Europe, and Northern America. This projection suggests Africa has considerable potential to enjoy a demographic dividend. Whether and when it actually materializes, and also its magnitude, hinges on policies and institutions in key realms that include macroeconomic management, human capital, trade, governance, and labor and capital markets. Given strong complementarities among these areas, coordinated policies will likely be most effective in generating the momentum needed to pull Africa’s economies out of a development trap.

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Dependence Ratios Across Different Regions

 

The Secret to Autocratic Success (The Example of China)

This is from The Economist:

Even so, Mr Xi’s authority remains hemmed in. True, his position at the highest level looks secure. But among the next layer of the elite, he has surprisingly few backers. Victor Shih of the University of California, San Diego, has tracked the various job-related and personal connections between the 205 full members of the party’s Central Committee, which embodies the broader elite. The body rubber-stamps Mr Xi’s decisions (there have been no recent rumours of open dissent within it). But the president needs enthusiastic support, as well as just a show of hands, to get his policies—such as badly needed economic reforms—implemented. According to Mr Shih, the president’s faction accounts for just 6% of the group. That does not help.

Admittedly, this number should not be taken too literally: it is difficult to assign affiliations to many of the committee’s members. Doubtless, too, many members who are not in Mr Xi’s network support the president out of ambition or fear. Still, Mr Xi can rely on remarkably few loyal supporters in the Central Committee because he did not choose its members. They were selected at the same time he was chosen as party leader in 2012, a process overseen by the dominant figures of that period, Mr Hu and the long-retired Mr Jiang.

Most people who laud China’s autocratic success conveniently choose to ignore two important facts:

  1. That China’s rulers, at least since the late 1970s, have not been totally unaccountable. The country is a dictatorship by committee. And a large committee at that. It is not a personalist one man show.
  2. The the Chinese party-state works tirelessly to reduce the cost of compliance among its citizens — through conscious state building, coercion, and public services.

What this means is that in order to replicate China’s autocratic success, would be little Chinas must invest in both state capacity and intra-elite accountability (perhaps by building strong, institutionalized parties).

Absent this, what you are likely to get are mediocre petty tyrants running disorganized non-states with infant mortality rates straight out of the 16th century.

Demography is Destiny (or why two heads are better than one)

Bradford DeLong has a fantastic blog post on the relationship between population size and economic growth and development. He writes:

In Kremer’s model, population will grow and eventually population will be high enough that research and development will proceed fast enough to push income per capita high enough to trigger the demographic transition and thus break the Malthusian proportional link between resources and technology on the one hand and population on the other. After that link is broken, economic growth will predominantly take the form not of Malthusian increases in population but rather Industrial Revolution and Modern Economic Growth increases in living standards and labor productivity.

The breakthrough to an Industrial Revolution, Modern Economic Growth, and our present prosperous global post-industrial economy is therefore baked into the cake. It is an all-but-inevitable event in human history produced by the simple fact that when it comes to generating useful ideas two heads are better than one: “the fundamental nonrivalry of technology as described by Paul Romer (1986)…”

DeLong then tests an alternative theory in which the economic takeoff of WENA countries after 1750 could have been a fluke, and concludes that the British industrial revolution at most saved the world 150 years — that is, “if you take the association between global populations and global economic growth back before the British Industrial Revolution seriously, as a causal relationship.

The whole post is worth reading. The empirical bits are clear and easy to follow. See also here.

In my Political Economy of Development class I make sure that my students understand the relationship between demography and human development — (i) the impact of demography on state development; and (ii) the impact of state development on markets and economic growth and development. To that end I often use these three illustrations.

Up until the mid 1990s tiny Europe had more people than all of Africa. In the next 30 years Africa’s population will grow by about 800 million people. By 2050 the Continent is projected to have 2 billion people; and half of the children being born in the world will be African. There is no reason to believe that the African experience after these demographic changes will not follow established correlations between population size, state development, and technological change.

Why are Africans getting shorter?

South Asia still posts the lowest average height for adults in the world (see image below). But a remarkable finding of a recent study is that adult Africans (among other low income regions of the world) have gotten shorter, on average, since the 1970s.

Being taller is associated with enhanced longevity, and higher education and earnings. We reanalysed 1472 population-based studies, with measurement of height on more than 18.6 million participants to estimate mean height for people born between 1896 and 1996 in 200 countries. The largest gain in adult height over the past century has occurred in South Korean women and Iranian men, who became 20.2 cm (95% credible interval 17.5–22.7) and 16.5 cm (13.3–19.7) taller, respectively. In contrast, there was little change in adult height in some sub-Saharan African countries and in South Asia over the century of analysis. The tallest people over these 100 years are men born in the Netherlands in the last quarter of 20th century, whose average heights surpassed 182.5 cm, and the shortest were women born in Guatemala in 1896 (140.3 cm; 135.8–144.8). The height differential between the tallest and shortest populations was 19-20 cm a century ago, and has remained the same for women and increased for men a century later despite substantial changes in the ranking of countries.

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What explains deceleration in average adult heights on the Continent?

One obvious explanation is a decline in nutrition amid rising populations and declining agricultural productivity (Africa barely registered a green revolution). Another major culprit is the economic disaster that visited the Continent from the late 1970s to the early 1990s — which resulted in poor nutrition and an unchecked disease burden. Lastly, there is the issue of water and sanitation, especially in the context of a rapidly urbanizing population, which has direct implications for the realized disease burden.

The top 20 best countries to invest your money in Africa

This is according to the latest Ernst & Young’s Africa Attractiveness Report (2016). Kenya is ranked 4th. Ahead of Tunisia, Mauritius, and Botswana. You just need to spend a few hours in Nairobi, or the other 46 county headquarters, to understand why. While economic inequality remains to be a huge (political) challenge, it’s hard to argue against the structural transformations underway in the Kenyan economy.

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More on this year.

Human Capital and Economic Development in Britain, 1750-1930

B. Zorina Khan writes:

Many argue that the nature of early British industrialization supports the thesis that economic advances depend on specialized scientific training, the acquisition of costly human capital, and the role of elites. This paper examines the contributions of different types of knowledge to British industrialization, by assessing the backgrounds, education and inventive activity of the major contributors to technological advances in Britain during the crucial period between 1750 and 1930. The results indicate that scientists, engineers or technicians were not well-represented among the British great inventors, and their contributions remained unspecialized until very late in the nineteenth century. For developing countries today, the implications are that costly investments in specialized human capital resources might be less important than incentives for creativity, flexibility, and the ability to make incremental adjustments that can transform existing technologies into inventions that are appropriate for prevailing domestic conditions.

…….. The patent records also enable us to examine whether a science background increased productivity at invention. Again, the patterns are consistent with the notion that at least until 1870 a background in science did not add a great deal to inventive productivity. If scientific knowledge gave inventors a marked advantage, it might be expected that they would demonstrate greater creativity at an earlier age than those without such human capital. Inventor scientists were marginally younger than nonscientists, but both classes of inventors were primarily close to middle age by the time they obtained their first invention (and note that this variable tracks inventions rather than patents). Productivity in terms of average patents filed and career length are also similar among all great inventors irrespective of their scientific orientation. Thus, the kind of knowledge and ideas that produced significant technological contributions during British industrialization seem to have been rather general and available to all creative individuals, regardless of their scientific training.

The whole paper is definitely worth reading and is available here.

Barack Obama on Uhuru Kenyatta

This is from Jeffrey Goldberg in the Atlantic:

Obama’s relationship with Kenyatta is complicated. A careful reading of Obama’s memoir, Dreams From My Father, suggests that he holds Kenyatta’s father, Jomo Kenyatta, the liberator of Kenya, indirectly responsible for his own father’s premature demise. (The elder Kenyatta, a member of the Kikuyu tribe, froze out Obama’s father, a Luo, from government service after the elder Obama complained too insistently about corruption.) And the younger Kenyatta’s association with human-rights violators has placed a question mark over his head. But Obama also believes that Kenyatta is at least intermittently committed to battling tribalism and corruption, and aides tell me that Obama will devote a part of his post-presidential years to the issue of African governance.

Instead of focusing on “African Governance,” I’d suggest President Obama spends part of his post-presidential years as Africa’s economic ambassador to the United States and beyond.

“Good governance” and “good institutions” are great. But the notion that African states have to reach zero corruption and zero rigged elections before any factories can be built is a misguided fantasy. Institutions and positive economic performance co-evolve. Good politics is not always good economics; and good economics is not always good politics. Africa, despite everyone’s apparent belief in the region’s exceptionalism, is not unique in this regard.

Elite Political Stability and Development: The Case of Europe

Alex Lee of Rochester and Avi Acharya of Stanford write:

During the Middle Ages, most European polities operated under a norm that gave only the close male relatives of a deceased monarch a clear place in the line of succession. When no such heirs were available, succession disputes were more likely, with more distant relatives and female(-line) heirs laying competing claims to the throne. These disputes often produced violent conflicts that destroyed existing state institutions and harmed subsequent economic development. Given these facts, we hypothesize that a shortage of male heirs to a European monarchy in the Middle Ages has a deleterious effect on levels of development across contemporary European regions ruled by that monarchy. We confirm this hypothesis by showing that regions that were more likely to have a shortage of such heirs are today poorer than other regions. This finding highlights the importance of the medieval period in European development, and shows how a sequence of small shocks can work in combination with both institutions and norms in shaping long-run development trajectories.

……. Our main empirical finding demonstrates the path dependent effects of the uneven nature of state development in medieval Europe arising due to the availability of male heirs. We show that regions of Europe that were ruled by medieval monarchs who had an abundance of male heirs are today richer than other regions. We are also able to trace our effects over time by showing that urban density in each century between 1300 and 1800 was higher in regions that had an abundance of male heirs. In addition, we show that an abundance of male heirs also decreased the frequency of internal wars and coups during the Late Middle Ages, and we find that contemporary economic development is negatively correlated with the frequency of these medieval wars and coups.

Forget the sweeping comparisons between England and the rest (esp France) that is common in works about economic development in Europe. This paper offers lots of great insights about the mechanics of statebuilding (and institution building) and the impact on economic development.

The linking of medieval European political realities to economics outcomes in 2007-2009 still requires a tighter justification. But the general insights in the paper about elite-level conflict and institution-building are spot on.

The paper is a reminder that our obsession with vertical accountability (mostly elections) as a means for institution-building is patently misguided. Much of the action takes place at the elite-level, hence the need to focus on horizontal accountability (as yours truly does….)

As they say, the paper is self-recommending.

H/T Andy Hall.

The vanishingly small African middle class

The Economist reports:

Screen Shot 2015-10-23 at 12.50.11 PMGood data on the exact size of the middle class are hard to come by, but it remains small across most parts of the continent. The Pew Research Centre, an American outfit, reckons that just 6% of Africans qualify as middle class, which it defines as those earning $10-$20 a day. On this measure the number of middle-income earners in Africa barely changed in the decade to 2011.

…… Unlike Asia, Africa has failed to develop industries that generate lots of employment and pay good wages. Only a few countries manufacture very much, largely because national markets are small and barriers to trading within Africa are huge. Most people who leave the countryside move into labour-intensive but not very productive jobs such as trading in markets. John Page, also of Brookings, reckons that such jobs are on average only about twice as productive as the ones that many left behind.

The Correlation Between Patience and Economic Development

Thomas Dohmen and co-authors write:

According to standard dynamic choice theories, patience is a key driving factor behind the accumulation of the proximate determinants of economic development. Using a novel representative data set on time preferences from 80,000 individuals in 76 countries, we investigate the empirical relevance of this hypothesis in the context of a development accounting framework. We find a significant reduced-form relationship between patience and development, whether measured in terms of contemporary income, historical development, or medium- and long-run growth rates, with patience explaining a substantial fraction of development differences across countries. Consistent with the idea that patience affects national income through accumulation processes, patience also strongly correlates with human and physical capital accumulation, investments into productivity, and institutional quality. Additional results show that the relationship between patience, human capital, and income extends to analyses across regions within countries, and across individuals within regions. Taken together, our results point to the importance of heterogeneity in time preferences for understanding comparative development.

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The results establish that, within countries, average patience in geographical regions predicts both regional income per capita and average years of education. Analogous results obtain in individual-level analyses, where individual patience predicts both household income and educational attainment within countries and regions. Thus, our subnational results on the interplay between patience, accumulation processes, and income closely mirror those established in cross-country analyses, highlighting that our results are not driven by unobserved country characteristics or survey procedures.

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The paper is very interesting. And definitely worth reading.

Academics are working hard to unlock ways of studying the correlation between culture and economic development. This is one such example. I like that the authors appreciated the reverse causality between patience and institutions. I wish they had done the same with the proximate determinants as well.

Patience does not strike me as something that springs from deep endowments. It is something that can be nurtured, for example, by increasing average years of schooling; or living in an environment that guaranteed physical security and a reasonable degree of predictability (see Blattman on fear).

A Commentary on Research Priorities in Development Economics

Over at the Bank’s Future Development blog, Princeton Economist Jeffrey Hammer writes:

The Chief Minister posed serious questions that have traditionally been the bread and butter of the economics profession. Unfortunately, we are not even trying to answer them any more. The specific question was “Should I put more money into transport? Infrastructure (power, roads, water)? Law and order? Social services? Or what? And where am I going to get the money?” What questions could be more solidly part of the core of economics than these? Unfortunately none of these were even remotely the focus of the “evidence-based” policy making discussed.

Almost all of the cases analyzed were  single, simple policy “tweaks” that were, first of all, isolated from the broader market context in which they occurred and, second, had no conception of opportunity cost – what we would have to give up to pursue these things? We had an answer to “how to improve a public food distribution system” but even with a precise answer (to whether a tweak would work) we had no idea whether the substantial amount of money funding such a system is a good idea. Maybe the Chief Minister would be better off improving education or road networks or police or rural electricity. Some of these alternative policies could have more impact on food consumption than food distribution if we thought about how the world worked. Getting food to market securely (roads, better cold storage, trustworthy police and safe roads – this is Pakistan, which no one seemed to notice) may increase food availability much more than any tunnel-visioned food program Or not – maybe the food distribution system is better. We just don’t know. And none of us “experts” are trying to find out.

When someone says “we should have more “X” because we have evidence that it works”, the response should be “compared to what?” What should we cut in order to promote your particular interest? My hobby horse these days is more sanitation in South Asia. I should have to defend it against (at least) a few alternatives.

What’s your justification for your latest hobby horse?

My take on the gap highlighted by Hammer is that what is good for reviewers is seldom useful to policymakers. The incentive for academics is to publish. And this will always be reflected in the design and implementation of interventions headed by academics. This is not necessarily a bad thing [For obvious reasons we should firewall academic research from the actual process of policymaking. The latter should be the political process that it is, albeit informed by the former]. I think the widespread acceptance of rigorous evidence-based policymaking has been a net benefit for the developing world. What it means though, is that the “public sector” development research community — i.e. the IMF, the World Bank, & host country research institutes — should do more to ensure that funding for hyper-targeted interventions do not detract from broader macro research (like, when and why did the rain start beating Ghana?)

However, in the long run, developing countries will be better served by having more and more of their own/country-based politically relevant macroeconomists.

This is because answering the types of questions posed by Hammer requires one to also take a political stand (on account of a lack of consensus among economists). Economists who can’t do this will invariably resort to “technical” solutions that can be perceived as “apolitical” by both host governments and the sponsoring foreign development agencies. Again not necessarily a bad thing, just a reflection of the politics of knowledge production.

H/T William Easterly.

Is evidence-based institutional analysis a possibility?

Chris Blattman writes:

But Acemoglu is right that institutional and political change are more important and the evidence-based crowd have done very little here. Most of that evidence is about anti-corruption or election monitoring or other things that I doubt change politics very much.

Meanwhile all the good political economy research (like Acemoglu’s) has no clear implication for social and political change in the world. There is a big disconnect. These scholars have mostly ignored this gap either because… I don’t know why. Maybe it’s too treacherous or hard, or they don’t find it interesting enough, or they are cynical about policy change. I don’t know. Someone explain it to me.

Blattman is spot on.

I think that students of institutions and institutional development have not joined the evidence-based crowd for two main reasons:

  • Politics I: Much of the evidence-based research out there eschews politics, instead focusing on the technical aspects of problems. Works that explicitly deal with political scenarios exist, but are rare. Part of the reason this is the case is that agencies that finance impact evaluations and other kinds of evidence-based policy research agendas have incentives to remain as apolitical as they can (you need host country government permission to do research in the first place …..)
  • Politics II: The other reason is that it is almost impossible to engage in politically relevant big-picture-development research while remaining apolitical. You see this in splits among macroeconomists in the United States (Macro questions make it really hard for researchers to shed off their normative priors). In the same vein, the best placed people to carry out evidence-based studies of institutions and how to change them are often professors in universities in the developing world — the problem is they do not do enough research due to a lack of resources and/or the relevant skill sets; and their own governments often neglect them. Regardless of their nationality, the most visible development economists in universities in the North Atlantic often lack the political connections or the bandwidth to engage in host-country politics; and are thus limited in the extent to which they can effectively study the most vexing policy questions out there.

These reasons are not due to anyone’s fault, just how research is currently financed and structured.

A possible way to get around these problems could be MBA-style case studies of reform programs from across the globe that can then be retooled by Comparativist country specialists — incoming Stanford CDDRL director Frank Fukuyama has very exciting ongoing work on this front.

On a tangentially-related point, I think that works that combine technical brilliance and deep local knowledge (think Bates’ lesser-read books on the Zambian Copperbelt) are about to come in vogue again. It used to be that only a few grad school programs (at least in political science) emphasized technical competence out of econ envy to match the economists. This is getting more commonplace, thereby establishing a new baseline (the data revolution is also helping a great deal by increasing the scope of country-specific studies of macro questions). And once a critical mass is achieved then the comparative advantage will favor those who are both technically competent and can also speak intelligently about how policy dovetails with local politics. The title “country-specialist” will soon no longer be synonymous with “qualitative research”; and more students will be primed to value good qualitative research.

Are Power Pools the Answer to Chronic Power Shortages?

Auriol and Biancini have a nice theoretical take on the subject of regional power pools in the World Bank Economic Review:

Power market integration is analyzed in a two-country model with nationally regulated firms and costly public funds. If the generation costs between the two countries are too similar, negative business stealing outweighs efficiency gains so that, subsequent to integration, welfare decreases in both regions. Integration is welfare enhancing when the cost difference between two regions is large enough. The benefits from export profits increase the total welfare in the exporting country, whereas the importing country benefits from a lower price. In this case, market integration also improves incentives to invest compared to autarky. The investment levels remain inefficient, however, especially for transportation facilities. Free riding reduces incentives to invest in these public-good components of the network, whereas business stealing tends to decrease the capacity to finance new investment.

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Existing and Planned Power Pools in Africa

There is a lot of excitement in the power sector in Africa these days. Eastern Africa will probably be the most power-rich in the next few years: Ethiopia’s 1870MW Gibe III will likely come online later this year (oh, and there is the ongoing Grand Renaissance Dam project that will produce 6000MW [or 2800MW?]); Kenya has had a massive push for geothermal, solar and wind generation; and Kenya, Uganda, and Tanzania have commercially viable deposits of oil and gas that will also come online within the next six years. The region is also very well integrated, although there is need to upgrade power transmission infrastructure. The Bank has an ongoing project in this regard [that is way behind schedule].

For more on this subject see my commentary on energy sector integration in Africa over at the African Development Bank blog.