Do Governments in Developing Countries Pursue Sustainable Debt Policies? Empirical Evidence for Selected Countries in Africa and Latin America

In this paper we test for sustainability of public debt in selected low- and middle-income developing countries of Africa and Latin-America. We do this by analysing how the primary surplus to GDP reacts to variations in the debt to GDP ratio where we allow for a time-varying reaction coefficient. Moreover, we test for stationarity of the overall budget deficit of the selected countries. The results show that, despite rising debt ratios, there is empirical evidence for some of the countries that public debt is sustainable, independent of whether they belong to the low-income or middle-income group of countries.     

Between poverty and prosperity: China’s dependent development and the ‘middle-income trap’

Despite China’s rapid economic growth in the past three decades, Chinese officials and experts are increasingly worried that the country is slowly heading towards the ‘middle-income trap’. The fear is that China might suffer the same stagnation and turbulence as Latin American economies did in the 1980s and 1990s. Will China be able to avoid this trap? Building on the insights of world-systems theory, this paper argues that China’s dependent development, although enabling it to escape the ‘poverty trap’, is likely to bog it down in the ‘middle-income trap’. China’s heavy reliance upon foreign technologies and investment has harmful effects on its economy. Dependent development not only increases China’s economic vulnerability but also truncates domestic industries. To escape the trap, the Chinese state should play a more active role in shifting its growth model away from low-end commodity manufacturing to knowledge-based, high value-added activities.     

Who Benefits from Higher Education in Low- and Middle-Income Countries?

In this article, we investigate how higher education contributes to the employment and earnings of individuals in labour markets, and whether social origins play a role in the financial benefits from higher education. We focus on these questions in nine low- and middle-income countries: Armenia, Bolivia, Colombia, Georgia, Ghana, Kenya, Laos, Macedonia, and Vietnam. We use the recent Skills Towards Employability and Productivity (STEP) surveys of urban labour force participants to examine individuals’ educational attainment, labour market participation, and earnings. Using logistic regressions, we find that individuals from disadvantaged origins are less likely to obtain a higher education degree. We find that in most of these countries, individuals who have earned a higher education degree are significantly more likely to be in the labour force and find employment, and enjoy sizable earnings premia. The findings are fairly robust with regard to the samples of individuals examined, and the methods used to measure earnings premia. Finally, we find little evidence that the earnings premia from higher education vary by social origins or the likelihood of an individual completing a degree. These results suggest that the benefits from higher education are comparable for individuals from disadvantaged and advantaged social origins.     

The Impact of Natural Disasters on Remittances to Low- and Middle-Income Countries

In this paper, we offer novel empirical evidence on the impact of natural disasters on remittance flows towards low- and middle-income countries. We consider a panel of 98 countries over the period 1990–2010. Our findings show that remittances increase after a disaster, thus contributing ex post to the reconstruction process. At the same time, we find that remittances play a key role in terms of ex ante risk preparedness for those countries that experienced more disruptive events in the past. Finally, when taking into account the interaction with the level of development of the local financial sector, remittances seem to substitute for less efficient financial systems both in terms of ex post response to disasters and in terms of ex ante risk management strategy.     

Understanding Sub-Saharan Africa’s Extreme Poverty Tragedy

Motivated by a recent World Bank report on achieving of Millennium Development Goals which shows that poverty has been declining in all regions of the world with the exception of Sub-Saharan Africa (SSA), this study puts some empirical structure to theoretical and qualitative studies on the reconciliation of the Beijing model with the Washington Consensus. It tests the hypothesis that compared to middle-income countries, low-income countries would achieve more inclusive development by focusing on economic governance as opposed to political governance. The empirical evidence is based on interactive and noninteractive fixed effects regressions and 49 countries in SSA for the period 2000–2012. The findings confirm the investigated hypothesis. As the main policy implication, in order to address inclusive development challenges in the post-2015 development agenda in SSA, it would benefit low-income countries in the subregion to prioritize economic governance. Other theoretical and practical contributions are also discussed.     

Does Conditionality Mitigate the Potential Negative Effect of Aid on Revenues?

Abstract

This paper assesses whether conditionality in IMF-supported programmes has helped offset the potential negative effect of foreign aid on tax revenues. The analysis – carried out on panel data covering 1993-2012 for 111 low- and middle-income countries – shows that growing use of revenue conditionality by low-income countries partially offsets the depressing effect of foreign grants on tax revenue, particularly on taxes on goods and services. The impact of conditionality is strong in countries where aid dependence is high and where institutions are strong, suggesting that revenue conditionality cannot substitute for weak institutions in mitigating any negative effect of aid on tax revenue collection.     

Post-Accra: is there space for country ownership in global health?

Abstract

On 4 September 2008 the Accra Agenda for Action, which emphasised that country ownership over health must be strengthened, was agreed upon. While the Agenda for Action, which builds on the 2005 Paris Declaration, is a major step forward, there are still structural factors that impede developing country ownership in health. This paper outlines the key issues in the governance and resourcing of public health in low- and middle-income countries focusing on three major structural challenges for developing countries: the proliferation of initiatives, donor influence on priority setting and donors' lack of accountability, and the sustainability of current levels and types of external financing. How can these structural obstacles be overcome? Three avenues hold considerable promise: creating new mechanisms to hold donors to account, developing national plans and strengthening national leadership in health, and building South–South collaborative networks through bilateral, multilateral and plurilateral relations.     

Determinants of developing country debt: the revolving door of debt rescheduling through the Paris Club and export credits

Programmes designed to alleviate developing country debt have been implemented by bilateral, commercial and multilateral creditors and sovereign debt has been restructured under Paris Club negotiations. These strategies have not been very successful at reducing the debt levels of developing countries, in part because they continue to receive export credit insurance facilities through export credit agencies (ecas). The purpose of this paper is to examine the high percentages of developing country debt owed to governmental ecas. Analysis of the external debt of low-income and lower middle-income economies at five year intervals from 1980 to 2010 finds a substantial part of the indebtedness of these economies is held by ecas. Analysis of specific sub-Saharan African countries undergoing debt rescheduling and forgiveness through Paris Club negotiations was done for Ghana and Kenya. These results show that, following debt restructuring, new export credit guarantees and/or loans were forthcoming to these countries from the ecas of the creditor countries that rescheduled their old debt in Paris Club negotiations during 2000–12.     

How stalled global reform is fueling regionalism: China’s engagement with the G20

In the Chinese view, the architecture of contemporary global governance – especially that of the Bretton Woods institutions – is flawed and in need of reform. Developing nations (like China), the argument runs, need to be given a role proportionate to their global economic influence. Since the Group of Twenty (G20) became a leaders’ summit in 2008, China has used the forum to push for such reform. But today, despite some supposed progress, reform has stalled. Recognising this fact, China is increasingly emphasising regional integration in its strategy for overcoming the middle-income trap. Global reform has not been abandoned, but – given its infeasibility – is no longer a short-term priority.     

Economies of scale and Brazilian local government expenditure: evidence from the State of Paraná

ABSTRACT

Controversy surrounds local government reform, particularly efforts directed at reducing the number of local authorities to secure economies of scale. We examine whether economies of scale exist in local government outlays by analysing the expenditure of 398 municipalities for the Brazilian state of Paraná using a 16-year panel dataset covering the period 2002–2017. We find evidence that municipal expenditure is characterised by substantial scale economies. However, given the strong correlation between population size and population density, it is important to ascertain whether the influence of population size on municipal expenditure is due to variations in population density or not. When local government areas are divided into sub-groups based on population density, evidence of scale economies remains with the majority of councils operating below optimal size. Municipal consolidations may thus lead to lower per capita expenditure.     

Will blockchain emerge as a tool to break the poverty chain in the Global South?

Just like its recent predecessors, blockchain – also known as the distributed ledger technology – is considered to have the potential to cause major economic, political and social transformations in the Global South. The visible effects of this technology are already being noted there. We present early evidence linking the use of blockchain in overcoming some economic, social and political challenges facing the Global South. The article highlights the key applications and uses of blockchain in developing countries. It demonstrates how blockchain can help promote transparency, build trust and reputation, and enhance efficiency in transactions. The article looks at opportunities and key triggers for blockchain diffusion in these countries. It also delves into challenges and obstacles that developing economies are likely to encounter in the use of blockchain.     

The changing roles of free economic zones in development: A comparative analysis of capitalist and socialist cases in East Asia

Free economic zones (FEZs) play important roles in industrialization and economic development of both capitalist and socialist countries in various regions of the world, and thus have become a major subject of study in the development literature. Theoretical debate and empirical analysis have focused narrowly on the positive and negative economic effects of export processing zones (EPZs) in capitalist Third World countries, without giving sufficient consideration to why, when, and how different types of FEZs in both capitalist and socialist economies adapt their roles in achieving development objectives under changing international and domestic conditions. In this article, I systematically compare the dynamic development roles of three FEZs in two different systems—the state capitalist economies of Taiwan and South Korea and the reforming socialist economy of China—during 1966–1990. The comparative findings are interpreted from competing and complementary perspectives of major development theories. Finally, I use the comparative evidence to refine a lifecycle model of the evolution and prospect of EPZs in capitalist newly industrializing countries, and suggest an alternative scenario for FEZs in socialist economies. Xiangming Chen is assistant professor of sociology at the University of Illinois at Chicago, affiliated with the Center for East Asian Studies at the University of Chicago, and a research fellow at the IC² Institute at the University of Texas at Austin. His current research focuses on the interface between urban and economic development from a comparative perspective, with a central focus on China. He has recently published several papers on urbanization, urban housing reform, commodity chains, and regional development in China in a number of social science journals and edited books.     

Life Satisfaction across Cities: Evidence from Romania

Based on the literature on agglomeration economies and studies on life satisfaction, especially with regard to Central and Eastern European countries, this article focuses on subjective wellbeing in Romania between 1996 and 2011. The findings indicate that life satisfaction was greater in larger cities, although the positive effects of agglomeration held up to a certain threshold. These effects were both direct (people living in large cities were more satisfied than those living in rural areas) and indirect (people living in rural areas embedded in urbanised regions were more satisfied than people in rural areas embedded in less urbanised regions).     

The Russian health crisis and the economy

Russia experienced a severe health crisis in the 1990s, as reflected by a drop in life expectancy. It has been suggested in literature that this poor state of health is likely to endure and will significantly retard economic growth in the country. This paper uses evidence from other former Communist countries and studies of income–health relationship across economies to evaluate these claims. It concludes that the mortality increases of 1988–94 and 1999–2000 were the effects, rather than causes, of the economic recession. The state of health is unlikely to put a brake on future economic growth.     

Safeguarding Common-Pool Resources in Transition Economies: Experimental Evidence from Central Asia

Empirical evidence suggests that the propensity to cooperate in common pool resource dilemmas is higher for small, homogeneous groups with efficacious monitoring and sanctioning mechanisms. Given that transition from socialist to market economies is associated with larger, more heterogeneous groups with diluted opportunities for monitoring and sanctioning, individuals in later-stage transition economies may be expected to be less cooperative than their early-stage counterparts. However, evidence from experiments conducted with subjects in two economies at different stages of transition suggests that this may not be the case. These findings have implications for both theorists and practitioners alike.     

Manifestations,Drivers, and Frictions of Mobile Phone Use in Low- and Middle-Income Settings: A Mixed Methods Analysis of Rural India and China

Against the backdrop of alleged mobile phone ubiquity and the enthusiasm about the developmental value of mobile technology, this paper examines the manifestations, drivers, and frictions of mobile phone use in two low- and middle-income settings where mobile technology has diffused rapidly. Qualitative data from 231 participants and survey data from 800 adults in rural Rajasthan and Gansu provide consistent and strong support for the claim that the notion of ‘ubiquity’ can mislead development practice because it obscures persistent non-use, under-utilisation, and heterogeneous engagement with mobile technology despite its apparently wide accessibility in rural field sites. The paper suggests avenues for further work on the indicators of technology adoption, and it cautions that phone-based development interventions (and their benefits) may diffuse unevenly if the assumption of ubiquitous technology use is violated.     

Oil abundance and violent political conflict: A critical assessment

This paper addresses one of the empirical claims of the ‘resource curse’ argument, namely that oil abundance raises the probability of political violence. I argue that the two main theoretical premises of the oil-civil-war link, rent-seeking and the rentier state model, fail to provide a convincing argument as to why oil economies are more vulnerable to the onset of civil war. I find that three often-mentioned mechanisms as to why oil economies succumb to political violence not convincing; that oil economies are poor economic performers; that oil economies generate high corruption; and that oil economies tend to produce authoritarian regimes. I also examine the empirical evidence on the oil-civil-war link and conclude that the results are not robust. I conclude with some policy implications.     

Mechanisation and cropping intensification: Economics of machinery use in low‐wage economies

Farm mechanisation in less developed countries was expected to increase output and cropping intensity by enabling greater ‘timeliness’ of crucial farm operations. However, empirical evidence shows no such effects. It is demonstrated that in low‐wage economies only a small number of machines can be economically viable in a given area; this number is generally inadequate to improve timeliness of operations.     

Westminster in small states: comparing the Caribbean and pacific experience

Small states, and those in the Caribbean and Pacific regions in particular, are among the most stubbornly and disproportionally democratic countries in the world. And yet, they are rarely studied comparatively, despite sharing seemingly obvious similarities – aside from being small island states with developing economies they also tend to share a British colonial heritage and Westminster-inspired political institutions. This omission is all the more puzzling if we consider that the group does not conform to the standard battery of explanations developed by democratization theorists. To pave the way for further research across these two regions, this article provides a synoptic comparison of the process of democratization in Caribbean and Pacific small states. We highlight important similarities and differences that stem from the interaction between formal institutions and informal practices. We conclude by reiterating the benefits for scholars of democratization by looking at these significant yet hitherto rarely compared cases.     

The challenge of design of intergovernmental relations in economies in transition

The governments of Eastern Europe and the former Soviet Union are at a crucial juncture in their movement from highly centralized command economies to more decentralized market economies. While there is a belief in these countries that decentralization brings greater economic efficiency, the reality is that such a transition is a difficult process. This paper examines what types of administrative reforms are needed for the decentralization process, how far along the countries are with respect to these reforms, and what reforms are missing. As we discuss, many of the necessary administration reforms are missing and we argue that more attention must be paid to these elements for successful decentralization of these governments.

This paper examines the recent experience and reform needs of the key administrative aspects of the design of intergovernmental relations in countries in transition in Eastern Europe and in the former Soviet Union. There is a widespread realization in all of these countries that decentralizing government will help increase efficiency in the public sector just as privatization will improve efficiency in their economies. Decentralization of government operations is also attractive as a way to cement a democratic form of government. Despite the appearances of the existence of an already decentralized system, such as in the case of the Soviet Union, this experiment started in practically all cases with a lack of institutions and experience on how decentralized government operations should be organized.

As different as these countries are, there are many similarities in the reform process they are following in order to decentralize government structure. While the basic components of a decentralized system of government are emerging in many of these countries the structure of government has not fully evolved in a manner that can support such a decentralized system. Often, governments remain structured along a vertical hierarchy: information, budgetary authority, and revenue pass from the central government down to subnational levels of government while little communication or interaction exists at a horizontal level. In general, the assignment of revenue and expenditure has not been clearly defined among the two or three levels of government, central government transfers continue to occur in a relatively ad hoc manner, and the entire budgeting system still rests in many cases on more or less formal system of negotiations and bargaining among the different levels of government. There has been some change in this structure in certain countries. Over the last three years, both Poland and Hungary have legally increased the automony of subnational governments. In 1994 in Russia a new and more transparent system of intergovernmental grants has been established between the federal government and the regions. In 1994 also, Latvia introduced a more transparent formula-driven, transfer formula for the regional and municipal governments.

The focus of this paper is to develop a “blue print” for necessary changes in organization and administration of intergovernmental relations in countries in transition. While many experts have recently been discussing the public finance policy components of this new, evolving relationship among levels of government, less attention has been paid to the structural and administrative challenges and the information design issues that must be met in order to develop and support a system of intergovernmental relations.

The paper is organized as follows: First we review the major responsibilities and their allocation among levels of government, the assignment of revenue sources, and the system of transfers. We then turn to a discussion of the current experience of Eastern European and NIS countries in the context of the structural components of an intergovernmental fiscal system. Next, we analyze the organizational reforms that are necessary for the efficient functioning of a decentralized system of government in the economies in transition. Finally we “rate” the transition economies in relation to their current design of the system of intergovernmental relations and support mechanisms.