Tuesday, September 22, 2009

Tuesday, June 9, 2009

More on education and inequality

There's a great article over at VOX by Claudia Goldin and Lawrence Katz: "Education and Technology: Supply, Demand and Income Inequality".

Once again we see that educational attainment is the key to growth and development. The authors of this article highlight the impact on income distributions. Drew's comment on the last post is spot-on. Taking money away from education in the short run will likely turn out to be a huge mistake in the long run.

Wednesday, June 3, 2009

Inequality and the middle class

Here is an excellent article over at Forbes by Thomas Cooley.

Students of development econ will appreciate the power of the Solow model (stability of alpha and importance of the tech change parameter) highlighted by Cooley, though he does not discuss the model directly. The importance of human capital formation (education) is another key point.

Monday, May 11, 2009

Have a great summer!

I hope everyone enjoyed the course. I'm pleased with the way it turned out, though I do wish we had a bit more time. Spring semesters always seem to fly by.

This blog will be mostly inactive over the summer as I focus on research and house renovations.

I will be teaching an online natural resource econ class, so that blog will be active in summer session 1 (naturalresourceecon). All of you are welcome to read and contribute.

Congrats to all the class of 2009 graduates! Whatever you're doing, go after it.

Best,
-Schuhmann

Thursday, April 30, 2009

Trade, Labor and Growth

There's a nicely written article over at Real Clear Markets by John Tamny. He provides some valuable insight into protectionism, the real meaning of free trade, and the importance of capital movement for economic growth.

Friday, April 24, 2009

Development topics

Of all the topics covered this semester, which did you find the most interesting?

Which topic did you find the least interesting?

Was there a topic that you would have liked to discuss that we did not cover?

The Economic Crisis and the Millennium Development Goals

Also from the world bank: "The Economic Crisis and the Millennium Development Goals"

Which goal(s) do you think will be most affected?

The least?

Will any goals remain unaffected?


Backward slide in poverty gains

Bad news from the World Bank (part 1)... Millions are falling back into poverty due to the global economic downturn in Eastern Europe and Central Asia.

... and part 2: Negative growth for Africa despite relatively sound conditions in the financial sector.

Why Eastern Europe/Central Asia taking the earliest hit, but Africa is projected to take the biggest hit?

Wednesday, April 22, 2009

Daily reading

The other day in class we discussed blogging and reading in general.

I addition to reading the local paper every morning (front to back, usually only skimming the fluff), two Caribbean daily papers, I also spend a bit of time on these sister sites:
These sites provide compilations of articles from other news sources, most of which are editorial in nature, so take each reading with that in mind. They do a good job of providing balanced coverage though, so you'll find issues discussed from all sides. It is critical that you understand both sides of any issue that you plan to study, so when you read, be sure to read from both sides.

As I mentioned the other day in class, I try to sense the degree to which a group of students has made up their mind about something, and do my best to provide the other viewpoint. For example, when teaching an EVS class, I'll often come off as seriously pro-market. Lots of environemental students show up already convinced that markets are inherently bad. Sounds silly right? But it is no sillier than business school students that show up 100% convinced that markets are inherently good.

You might not like it, but I want to take what you think you know and turn it on its head, even if only for a moment or two. Hopefully this approach forces you to think about how to study issues objectively and figure them out for yourself (my approach usually involves data), rather than relying on what someone else has told you.

Tuesday, April 21, 2009

Interesting quick read

This one is from American Prospect ("The Argument over Inequality"), and provides an interesting complement to the longer article in the previous post.

History, economics and sociology all rolled into one.
That's why I love studying this stuff.

Fair warning: As with most writing in the popular press, you have to take this as one side of a really complex issue. There are some interesting facts, stats and anecdotes presented by the author, but it would be a stretch to call it an objective empirical analysis.

Monday, April 20, 2009

New York Magazine article

Gabriel Sherman of New York Mag presents an interesting perspective on Wall St, the elite and the financial crisis.

Saturday, April 4, 2009

Jamaica seeks MDG extension

From the April 3rd edition of the Jamaica Observer: Jamaica says it wants an extension of the 2015 deadline for achieving the United Nations Millennium Development Goals (MDGs).

In short, because of the current economic crisis, they don't think they're going to reach the goals.

The reports of the July meeting should prove interesting. Something tells me there's not going to be much in the way of good news.

Thursday, April 2, 2009

Tuberculosis

World TB day was last week, March 24, 2009.

According to the Stop TB Partnership, tuberculosis caused the deaths of more than 450,000 persons with AIDS in 2007, two times more than previously estimated by the World Health Organisation (WHO) and the Joint United Nations Programme on HIV and AIDS (UNAIDS). Approximately 9 million people are affected by TB annually, with over 1.5 million dying from the disease each year.

Here is the WHO fact sheet on TB.

This week, health leaders are meeting in Beijing at a meeting organized by WHO, China’s health ministry and the Bill and Melinda Gates Foundation. The meeing is focused on drug-resistant tuberculosis.

Today, our local paper ran a version of this story, in which the WHO Director-General Margaret Chan calls for serious action against drug-resistant TB, noting that if left unaddressed, the situation will soon become explosive.

What's going on here? What are the economic reasons for this sudden resurgence in a disease for which we've had a proper cure for decades?

Saturday, March 14, 2009

Iceland: Banks & fish

Here's a great article from Vanity Fair's Micheal Lewis about the rise and fall of Iceland's financial industry.

It is a long article, but well worth the read.

Monday, March 2, 2009

More questions on equality, growth and the stimulus

Here's a recent editorial by E.J. Dionne of the Washington Post,

and a column by Caroline Baum from Bloomberg that hits a similar topic.

There are a lot of questions here, but two are directly related to current class topics:

1. Will increasing equality via redistribution (as opposed to or in combination with "bail-out" cash) help get us out of the economic mess we're in in the short-run?

2. What will be the long-run implications for growth?

Dionne does not really address these directly, and basically starts with the (in)equality argument. Baum doesn't focus on the equality argument, but essentially proposes that now isn't the time to fix equality or other matters like the environment. She also questions the efficacy of the TARP funds and bail-outs in general, noting that trying to smooth things out in the short-run could have disastrous long-term consequences.

Based on what we've learned in the past two months, could policy aimed at redistribution (or other matters related to 'development' instead of 'growth') in the immediate term help or hurt the situation? Would policy favoring investment by the wealthy have a more pronounced effect given that those with higher incomes seem to have their money "on the sidelines" right now?

Friday, February 27, 2009

Taxes & equality

Remember the steadily increasing US Gini coefficient?

The President's budget and tax proposals are aimed at bringing it down.

Read about it in today's NY Times.

Monday, February 16, 2009

Captial, Africa needs capital...

... and maybe it could be green capital, according to United Nations Secretary General Ban Ki-moon.

Read about it here and here.

So, where is the capital going to come from?

Maybe from stimulus packages?


Why is this preferable to direct provision of food?

Read about a new program for food vouchers at the UN website.

Why might this be better than simply giving food or cash?

Monday, February 2, 2009

ROI and develpment assistance

This question came up in class last week: What is the return on investment from official development assistance (aid)? This is a pretty deep body of literature, and in general the results are inconclusive.

The return on aid really depends on a lot of things: the location of the recipient nation, political climate, the type of project, the savings rate of the recipient nation, etc. Aid can lead to significantly enhanced economic growth and development if conditions are right, but it also can be misappropriated, completely lost to waste and corruption and can even cause economic harm.

I found an interesting paper from two economists at the University of Copenhagen that analyzes the issue.

Dalgaard and Hansen (2005) look at micro-level ROI vs macro-level ROI to try to determine if the positive externalities from investment in growth projects such as roads, telecommunications and agricultural improvements outweigh the losses from misallocation of funds, rent-seeking etc.

In theory, if the macro ROI exceeds the micro ROI then the effects of the positive externalities outweigh the losses due to corruption etc. While micro-level ROI has recieved a great deal of attention in the econ literature, macro-level ROI apparently has not.

It's a fairly technical paper, but the main points are straightforward:
" Our principal finding is that the average aggregate gross rate of return on aid investments lies in the range 20-30 percent. Intriguingly, this is in accord with medianWorld Bank project level estimates. Moreover, aid investments are roughly as productive as domestically funded investments in physical capital.

In many ways this is an encouraging finding. It is certainly broadly consistent with the empirical work on aid effectiveness invoking ad hoc growth specifications, which tend to find that aid, on average, stimulates productivity. At the same time it is a sobering finding, since our estimates provide a sense of the limitations of aid in stimulating economic activity in poor economies."
In other words, the macro-level ROI is pretty respectable and is approximately the same as the micro-level ROI. This suggests that positive externalities and negative "leaks" balance out on average. Interestingly aid dollars produce approximately the same return as dollars invested domestically in physical capital.

A notable limitation of the study is that it does not examine the ROI on aid-based investments in human capital (i.e. education and training).

Another missing idea (one that would be useful for answering our questions from the other day) is to compare this to the ROI on investment in banks' financial stability.

But, just for giggles, according to a back-of-the-envelope look by Time magazine, the current ROI on bank bailout dollars is -1,096%.


Reference:
Dalgaard, C-J, and Hansen, H. (2005), "The Return to Foreign Aid". University of Copenhagen. Department of Economics Discussion Paper number 05-04.

Thursday, January 29, 2009

School & health care fees in developing nations

Last night, Stephen Lewis (former Special Envoy to the U.N.) lectured on "Winning the Battle Against Poverty & Disease in the Developing World".

He covered the eight millennium development goals, lamented the effects that the world financial crisis is having on the developing world, and spoke passionately about the need for policy reform and direct aid to the millions suffering and dying in Africa.

While discussing the education MDG, he briefly touched on an adverse secondary effect of a well-intended policy by the World Bank and the IMF: Tying development aid to the requirement that the recipient nation impose user fees for health care and education. He noted faulty econometric modeling as a cause, but did not go into detail.

This morning I've been doing some research on the issue... why in the world did the World Bank and the IMF think it would be a good idea to charge the poorest people on the planet fees for basic health care and education? After all, public education is free in Beverly Hills California, where median income is around $90,000 and the median house price is well over $2 million.

The policies were enacted as a means of "cost-sharing" or "cost recovery", where the rationale is that by imposing nominal fees for these services, revenue will be generated that can be used to provide higher quality services to more people.

Here is some reading:

Arguments for cost sharing

Arguments against cost sharing


There's a lot more out there. To me this seems to be a question of basic microeconomics. Do you see it? What did the IMF and World Bank assume that turned out to be false? We'll talk about the issue in class today.

Thursday, January 22, 2009

How HDI Relates to GDP

There is a cool interactive graphic from UNDP for comparing HDI and GDP.

Click here to give it a shot.

What does it mean when a nation's HDI rank > GDP rank?
What does it mean when a nation's HDI rank < GDP rank?

If you had to choose, where would you rather live, in a nation with a high HDI or a high per capita GDP?

Commitment to Development Index

Here's another interesting index to consider: The Commitment to Development Index (CDI) which measures seven areas where the developed world can contribute to the development of nations that are less well off.

The seven areas included in the index are:

• Quality and quantity of foreign aid
• Openness to developing-country exports
• Policies that influence investment
• Migration policies
• Environmental policies
• Security policies
• Support for creation and dissemination of new technologies

Read more...

Short article from The Economist here.

Description of the index from the Center for Global Development here (plus a whole lot of other good info).

Monday, January 19, 2009

Stephen Lewis lecture, Jan 28, UNCW

On Wed, Jan 28, 2009 7 pm in UNCW's Kenan Auditorium, Stephen Lewis will give a lecture titled “Time to Deliver: Winning the Battle Against Poverty & Disease in the Developing World”.

From UNCW:
Formerly the Special Envoy to UN Secretary-General Kofi Annan, Stephen Lewis founded the Stephen Lewis Foundation in Canada, which aims to ease the pain of HIV/AIDS in Africa by funding grassroots projects. In Lewis’ best-selling book, Race Against Time, he tackles the AIDS crisis head on, probing the appalling gap between vision and current reality, while also offering bracingly attainable solutions.

The lecture is part of UNCW's Leadership Lecture Series and is Co-sponsored by UNCW Student Media, Honors Scholars Program and Coastal Carolina UN Association
.
Click here for more information from UNCW, including a link to the Stephen Lewis Foundation.

I am trying to get us a block of seats. As an incentive to attend, if you attend and write a one-page summary of the lecture (as it relates to the economics of growth and development of course), you can earn up to 10 bonus points on your first exam.

Saturday, January 17, 2009

Kristof on sweatshops

This topic is sure to come up during the semester: labor standards and international trade agreements.

Nicholas Kristof, columnist for the NY Times, had a good piece in Thursday's Times (it ran in today's Star News).

Click here for the editorial and click here for his follow-up.

Where's the economics?
Will labor standards help or hurt development efforts?
Hint: consider the marginal rate of technical substitution.

Thursday, January 15, 2009

Short readings on PPP exchange rates

We'll be talking about purchasing power parity today in class, here are some links to extra reading:

There's a nice article here from the IMF about PPP.

And some easy-to-follow frequently asked questions about PPP from OECD here.

Finally, the most recent hamburger index from The Economist here.

Tuesday, January 13, 2009

NY Times on GDP and well being

An interesting article in the New York Times (August 30, 2008) covers some of the issues we discussed today in terms of GDP as a measure of well-being.

An important point that we did not cover in class is that GDP or its average (GDP per capita) does not reveal anything about the distribution of income. So, for example, two countries could have GDP per capita of $50,000 as follows:

Country A, population 300,000:
100,000 people with income = $30,000
100,000 people with income = $50,000
100,000 people with income = $70,000

Country B, population 300,000:
299,999 people with income = $1,000
1 person with income = $14,701,000,000

Both have the same per capita GDP, so look the same on paper.
But, where would you rather live?

What else does GDP not account for?

Friday, January 9, 2009

UNDP Human Development Reports

Each year the United Nations Development Program releases the Human Development Report.

The first report, released in 1990, highlighted important differences between economic growth and economic development, emphasizing (for a lot of reasons that we'll discuss in class) that national income measures (such as GDP) simply do not suffice as a measure of human well-being within a given nation.

UNDP essentially defines "development" as the improvement in people's options. Options for education, options for employment, options for health care, leisure, culture, political representation and so on... The basic idea is that more options in these facets of life translates to the ability to achieve an improved standard of living, but having more (less) money in a nation doesn't necessarily mean that people have more (less) options.

That first 1990 report provided a look back at historical development around the world since 1960, critically analyzed the state of human development around the world and suggested strategies for improvement in the future. Each year since then, the HDR provides an update since the last report, analysis and lessons learned, a lot of great statistics and a central theme.

Last year's theme (actually '07 & '08) was global climate change. In 2006 it was access to water. The theme for 2009 is migration.

These reports are extremely well-written and easy to follow and should prove to be valuable resources for our studies throughout the semester. Click here to access all Human Development Reports. Detailed reports by region and nation are also available.

Friday, January 2, 2009

Welcome to the growth and development blog!

Hello class.

This blog will be used to facilitate discussions of class topics, point out links to relevant articles, data or other useful information and, hopefully, get you thinking and writing about the issues.

I'll post topics throughout the semester, most likely a few times per week. The comments section will always be open, so please contribute to the discussion.

If you have ideas for blog topics or have found an article or news item that might be of interest to the class, please send it to me via email.

See you soon.
-ps