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Academic economists usually air their new ideas first in working
papers. Here, before the work gets dusty, a quick look at transition
policy research in progress.
Smoking Break
Looking for a cheap way to save millions of lives each
year in rural parts of poor countries -- and prevent soil erosion and slow
global warming at the same time? For some years now, development specialists
have been
touting the virtues of simple, cheap,
high-efficiency cooking stoves that can reduce indoor air pollution from open fires
-- one of the most prominent causes of respiratory illness and premature death
in parts of Africa and Asia. What's more, along with protecting householders
(especially children) from smoke inhalation, they cut back the use of brushwood
that otherwise protects fragile soils from erosion and reduce total greenhouse
gas emissions. (This is one of the reasons why Hillary Clinton, among others,
has become a
passionate advocate of "clean cookstoves.").
But there's a catch: To get
any benefit from these stoves, they have to be used. According to a
scientifically controlled study by Rema Hanna (Harvard), Esther Duflo (MIT), and
Michael Greenstone (MIT) that was conducted in a poor village in India,
introduction of the stoves did reduce smoke inhalation in the first year. But
in the three years following, the stoves ceased to make a noticeable
difference. "Households failed to use the stoves regularly or appropriately,"
the economists report, and "did not make the necessary investments to maintain
them properly." The sobering lesson, of course, is that engineering studies
back home have limited predictive value on how technology will be used in
real-world development settings.
Up in Smoke: The Influence of Household
Behavior on the Long-Run Impact of Improved Cooking Stoves. MIT Economics
Department Working Paper. Download free
here.
Forged in Adversity
Non-specialists tend to assume
that Eastern Bloc economies were one undifferentiated train wreck before the
collapse of the Soviet empire. But in fact these newly freed economies had
quite different characters in terms of social and human capital and traditions
of entrepreneurship. And while none of them has had an easy time integrating
with Europe, it shouldn't be surprising they've followed widely divergent paths
in managing the transition. If you really want to understand what happened, you
could spend a few months perusing the literature -- or you could cut a number
of corners and read this splendid big-picture analysis of two decades of
wrenching change written by
Anders Aslund, who made his reputation predicting
the economic implosion of the USSR long before it was fashionable.
Don't expect me to summarize
the summary. But I can offer you a sneak preview: Those difficult decades left
Eastern Europe in surprisingly good shape to recover from this last global
recession. Indeed,
Poland is now in a far better position to grow
than the countries on the southern periphery of the Eurozone.
Lessons from
Reforms in Central and Eastern Europe in the Wake of the Global Financial
Crisis. Peterson Institute Working Paper WP 12-7. Download free
here.
Go Girl
There's now a virtual
consensus among development specialists that reducing gender inequality is
critical to jumpstarting economic growth in the poorest countries -- and that
the surest route to greater equality lies in education. But western educators
learned decades ago that the culture of inequality deterring female empowerment
is all too often reinforced in school. Among other problems, girls are inclined
to defer to boys and therefore get less out of the classroom experience.
A group of researchers
(Harounan Kazianga, Dan Levy, Leigh Linden, and Matt Sloan) working under the
auspices of the
Institute for the Study of Labor (IZA)
in Germany have confirmed that what's true in Europe and America applies to
ultra-poor Burkina Faso as well. They compared traditional primary schools with
"girl-friendly" schools created under the
BRIGHT program, which is
funded by the U.S. government. (BRIGHT schools, by the way, are apparently
co-ed, but go out of their way to make themselves attractive to girls by adding
more and better trained female teachers, setting up separate bathrooms for
girls, etc.) The results have been pretty spectacular, increasing girls'
enrollment rates and raising test scores for both boys and girls.
The
Effects of "Girl-Friendly" Schools: Evidence from the BRIGHT School
Construction Program in Burkina Faso. IZA Discussion Paper No. 6574. Download
free here.
Islamic Derivatives
For all the bad rap following
the collapse of the financial bubble in 2008, financial derivatives remain
indispensable in managing risk in modern economies (your economist-narrator
said defiantly). But
sharia law bars financial speculation just as it
bans interest. And more often than not, the creation of a derivative -- say, a
bet on the price of gold in six months -- requires that one party to the
transaction have speculation in mind. Is there any way to make derivatives
acceptable in financial systems governed by Islamic law?
According to Andreas Jobst
(Bermuda Monetary Authority) and Juan Solé (Bank for International
Settlements), the answer is a definite maybe. By their reading of the
literature,
sharia does offer significant wiggle room, allowing
derivatives in a variety of circumstances. What's important now, the authors
argue, is to codify acceptable practices in the relevant countries so that
parties that do derivative contracts don't bear the risk that their agreements
will be declared invalid when there are efforts to enforce them.
Operative
Principles of Islamic Derivatives -- Towards a Coherent Theory. IMF Working
Paper WP/12/63. Download
here free.
Spillovers from
Microfinance
The idea that the introduction of formal ways to borrow
and save can make a big difference in the poorest of places is now widely
accepted. Indeed, tiny loans from both non-profits and profit-seeking
businesses seem to be the fashion these days, financing everything from cell
phones to farm equipment.
What's less clear, though, is their impact on the welfare
of people other than the immediate beneficiaries. Jeffry Flory, an economist at
the University of Chicago, examined one particular aspect of the question: The
degree to which access to formal savings and credit served as a safety net in
times of crop failures and other disasters. In a study of isolated villages in
central Malawi, he found that a one percentage point increase in households
with formal savings increased the number of households receiving
inter-household gifts/loans by about three percentage points, along with the
expected improvements in health outcomes.
A serendipitous finding, you say? Yes, but there is one
catch: The obligation to support extended families and friends in hard time is,
in a sense, a tax, and thus may well reduce the incentives to save and invest
in just the sort of places that most desperately need it to grow.
Micro-Savings
and Informal Insurance in Villages: How Financial Deepening Affects Safety Nets
of the Poor, A Natural Field Experiment. Milton Friedman Institute Working
Paper 2011-008. Download free
here.
Trade and the Arab Spring
It's one thing to engineer a political revolution, and
quite another to build a successful economy from the wreckage of autocracy and
exploitation. Can the Arab Spring countries (Egypt and Tunisia for now, but who
knows later on) find the means to become prosperous? Most relevant here, can
the West make a difference in their fate?
Economists Thorvaldur Gylfason, Inmaculada
Martínez-Zarzoso, and Per Magnus Wijkman explore one element: The potential for
gains from greater economic integration, both within North Africa and between
North Africa and Mediterranean Europe. They conclude that trade represents
enormous untapped potential within the Arab Spring countries -- not an
intuitive result, by the way -- and that Europe has the opportunit
y to use preferential access to its markets
as a carrot to make economic reform easier. Solid potential.
How Free Trade
Can Help Convert the "ArabSpring" into Permanent Peace and Democracy.
CESifo Working Paper 3882. Download free
here.
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