Africa will be undergoing substantial demographic changes in the coming decades with the rising working age share of its population. The opportunity of African countries to convert these changes into demographic dividends for growth and poverty reduction will depend on several factors.
... See More + The outlook will likely be good if African countries can continue the gains already made under better institutions and policies, particularly those affecting the productivity of labor, such as educational outcomes. If African countries can continue to build on the hard-won development gains, the demographic dividend could account for 11 to 15 percent of gross domestic product volume growth by 2030, while accounting for 40 to 60 million fewer poor in 2030. The gains can become much more substantial with even better educational outcomes that allow African countries to catch up to other developing countries. If the skill share of Africa's labor supply doubles because of improvements in educational attainment, from 25 to about 50 percent between 2011 and 30, then the demographic dividends can expand the regional economy additionally by 22 percent by 2030 relative to the base case and reduce poverty by an additional 51 million people.
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Policy Research Working Paper WPS7134 DEC 01, 2014
Ahmed, S. Amer; Cruz, Marcio; Go, Delfin S.; Maliszewska, Maryla; Osorio-Rodarte, Israel
The Latin America and Caribbean (LAC) region has seen a decade of remarkable growth and income convergence. Growth has been a key driver for reducing poverty and boosting shared prosperity.
... See More + It has been debated how much of this decade of growth has been driven by policy reforms and how much was due to the favorable external conditions. While external factors were supportive and relevant, the effect of domestic policies was just as relevant for explaining LAC's recent growth performance. The emphasis of domestic policy has shifted from stabilization policies to structural policies. In addition, a benchmarking exercise reveals which policy gaps will lead to the highest potential growth-payoffs for each country and helps identify potential trade-offs. The authors analyze growth in LAC using descriptive statistics and growth econometrics. The authors use these results for explaining the pattern of growth in LAC over the last decade, for looking ahead, and to identify potential policy gaps.
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Working Paper 91015 DEC 01, 2014
Araujo, Jorge Thompson; Brueckner, Markus; Clavijo, Mateo; Vostroknutova, Ekaterina; Wacker, Konstantin M.
This issue is an analysis of issues shaping Africa's economic future. Growth remains stable in Sub-Saharan Africa. Some countries are seeing a slowdown, but the region's economic prospects remain broadly favorable.
... See More + External risks of higher global financial market volatility and lower growth in emerging market economies weigh on the downside. In several Sub-Saharan African countries, large budgetary imbalances are a source of vulnerability to exogenous shocks and underscore the need for rebuilding fiscal buffers in these countries. The Ebola outbreak is exacting a heavy human and economic toll on affected countries and, if not rapidly contained, the risk of wider contagion grows. Without a scale-up of effective interventions, growth would slow markedly not only in the core countries (Guinea, Liberia, and Sierra Leone), but also in the subregion as transportation, cross-border trade, and supply chains are severely disrupted. In Sub-Saharan Africa, growth in agriculture and services is more effective at reducing poverty than growth in industry. Structural transformation has a role to play in accelerating poverty reduction in Sub-Saharan Africa. Increasing agricultural productivity will be critical to fostering structural transformation. Boosting rural income diversification can facilitate this transformation, as well. Investments in rural public goods and services (for example, education, health, rural roads, electricity and ICT), including in small towns, will be conducive to lifting productivity in the rural economy. Although Sub-Saharan Africa's pattern of growth has largely bypassed manufacturing, growing the region's manufacturing base, especially by improving its fundamentals, lower transport cost, cheaper and more reliable power, and a more educated labor force, will benefit all sectors.
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Some of the headings included in this issues of the Development Economics Prospects Group (DECPG) weekly global economic newsletter are as follows: additional easing by the European Central Bank (ECB) and speculation that U.S. interest rates might stabilize at a low level in the medium-term have helped reduce bond yields and volatility worldwide; declining current account deficits has strengthened resilience to fickle capital flows, but vulnerabilities remain; and while the outcome of the World Cup remains uncertain, past evidence suggests that winning the tournament is likely to boost confidence and exports.
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Some of the headings included in this issues of the Development Economics Prospects Group (DECPG) weekly global economic newsletter are as follows: despite weak activity in the first quarter, global growth is expected to accelerate during the second half of the year and into 2015 and 2016 - supported by strengthening demand from high-income countries; prospects vary across developing regions but capacity constraints in many countries and rebalancing in others will preclude a stronger pickup in growth; and a significant easing of global financing conditions should support activity in the short-term, but adds to medium-term risks.
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Some of the headings included in this issues of the Development Economics Prospects Group (DECPG) weekly global economic newsletter are as follows: developing-country central banks have put policy tightening on hold as global financing conditions eased; industrial production growth accelerated during Q1 in many developing countries, often in tandem with rising export growth; and euro area inflation ticked up in April and inflation expectations increased in May.
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This is a statement by H.E. Kittiratt Na-Ranong, Deputy Prime Minister and Minister of Finance, Thailand, representing the Constituency of Brunei Darussalam, Fiji, Indonesia, Lao PDR, Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga and Vietnam, at the eighty-ninth meeting of the Development Committee held on April 12, 2014.
... See More + He discusses growth in the post-crisis global economy: policy challenges for the developing countries, World Bank Group reforms, a successful IDA 17 replenishment, infrastructure financing, and mainstreaming disaster risks management in world bank group operations.
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Social welfare functions that assign weights to individuals based on their income levels can be used to document the relative importance of growth and inequality changes for changes in social welfare.
... See More + In a large panel of industrial and developing countries over the past 40 years, most of the cross-country and over-time variation in changes in social welfare is due to changes in average incomes. In contrast, the changes in inequality observed during this period are on average much smaller than changes in average incomes, are uncorrelated with changes in average incomes, and have contributed relatively little to changes in social welfare.
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Policy Research Working Paper WPS6842 APR 01, 2014
Many low and middle-income mineral-rich countries have experienced strong growth for a decade or longer, propelled by a rapid expansion of their mineral exports and a rise in prices of these commodities.
... See More + This sustained strong economic performance goes against the accepted wisdom that even though the mining sector, like other extractive industries, can generate foreign exchange and fiscal revenues, it contributes little to sustained economic growth and, by extension, human development. Through the presentation of trends and patterns of various indicators, this paper shows that in addition to economic growth, countries rich in minerals other than oil have experienced significant improvements in their human development index (HDI) scores that are on average better than those experienced by countries without minerals. In a sample of five low and middle-income countries with relatively long histories of mining, benefits came from foreign direct investment (FDI), export revenues, and fiscal revenues. The overall impact of the mining sector was much stronger if there were infrastructure benefits and strong linkages to other industries, especially through domestic procurement. Contrary to the notion that there are no jobs in mining, in this small sample, employment related to the mining sector was very high in countries where linkages were strong, even before the multiplier and fiscal expenditure impacts were accounted for. Cooperation between the public and private sectors seemed essential to increasing such linkages. In addition, mining firms often made substantial contributions to local and regional development, at times due to legal requirements but often not. All five countries have either relatively high HDIs (compared with neighboring countries) or strongly improving HDIs.
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Working Paper (Numbered Series) 87298 APR 01, 2014
The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. With the deepening of market economy, the share of the state-owned and collective enterprises declined.
... See More + Expansion and contraction, as well as establishment and closure, of firms became a common phenomenon. The level and volatility of firm productivity have become increasingly important aspects of the micro performance of the economy. This paper uses a firm-level data set collected annually by the National Bureau of Statistics of China in 1998-2007 to examine the role of different firm characteristics in productivity volatility. The paper measures productivity volatility at the firm level as the standard deviation of the annual growth rate of productivity. The main objectives are twofold: first, it examines the variation of productivity volatility across firms of different characteristics and their evolution over time; second, it investigates the sources of productivity volatility at the firm level in China. The results suggest that in general, productivity volatility at the firm level has declined over time in China. Among firms with different characteristics, large firms, old firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility, one in a positive way and one in a negative way. Although the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased.
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Policy Research Working Paper WPS6846 APR 01, 2014
Some of the headings included in this issue of the Development Economics Prospects Group (DECPG) weekly global economic newsletter are as follows: developing country industrial production growth remained weak in Q4, despite a surge in exports; retail sales growth across developing countries remains mixed; and developing country borrowing costs have eased slightly as spreads have narrowed relative to still low US long-term rates.
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This paper examines how international remittances are affected by structural characteristics, macroeconomic conditions, and adverse shocks in both source and recipient economies.
... See More + The paper exploits a novel, rich panel data set, covering bilateral remittances from 103 Italian provinces to 87 developing countries over the period 2005-2011. Remittances are negatively correlated with the business cycle in recipient countries and increase especially strongly in response to adverse exogenous shocks, such as natural disasters or large terms-of-trade declines. Financial development in the source economy, which eases access to financial services for migrants and reduces transaction costs, is positively associated with remittances. Conversely, recipient-country financial development is negatively associated with remittances, suggesting that remittances help alleviate credit constraints.
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Policy Research Working Paper WPS6812 MAR 01, 2014
Bettin, Giulia; Presbitero, Andrea F.; Spatafora, Nikola
Some of the headings included in this issue of the Development Economics Prospects Group (DECPG) weekly global economic newsletter are as follows: industrial production in developing countries grew in November 2013 at its fastest pace in a year, with the recovery becoming more broadly-based across regions; youth unemployment rates in 2013 remained uncomfortably high in most developing regions, averaging 13.9 percent of the 15 to 24 age range; and oil prices reached record highs during 2011-13 while price volatility dropped to historical lows.
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Based on new evidence from in-depth field surveys, this book addresses the unique situation of countries that remain deeply engaged in agriculture, and proposes a set of policy orientations which could facilitate the process of rural change.
... See More + With a duration of five years (2006-2010), its objective was to analyze the processes of liberalization and economic integration and their impacts on agriculture and the rural sector of developing countries. It also aimed to illustrate the situation of rural economies in terms of income, diversification, and overall transformation. The results obtained make it possible to improve the dialogue between national and international partners and to provide orientations for the agricultural and rural policy debates. Relying on a methodology that articulated micro-data collection with a macro structural perspective, the program conducted extensive fieldwork to investigate livelihood strategies of rural households, and married the results with a thorough understanding of structural change. The book highlights recurring patterns of diversification and specialization along the process of structural transformation. Further, reconnecting with a broader vision, it emphasizes the difficulties faced by late developers, whose economies offer few alternatives for households to diversify. Based on their assessment, the authors draw a series of policy lessons. They rightly point out the importance of states rebuilding their internal capacities to design comprehensive development strategies. These capacities are critical to addressing major constraints, defining priorities, and ensuring adequate sequencing. Above all, they show that for Sub-Saharan Africa, in the coming two decades, a strong reinvestment in agriculture (in addition to seizing opportunities for the development of manufacturing and services) will be the major policy tool for progressively raising income, mitigating risks, and fostering innovation and rural demand, which constitutes the main engine for rural diversification a major step for structural transformation. The authors also stress the role of the state in provisioning public goods, in adequately and carefully designing incentives, and in using the leverage offered by the development of small towns as a critical mechanism for rural change. These are all sensible and useful reminders for the donor community, governments, and local stakeholders, and represent an important contribution to the role of agriculture for development.
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Publication 70985 DEC 04, 2013
Losch, Bruno; Freguin-Gresh, Sandrine; White, Eric ThomasEnglish
This is a statement by Mr. Mukhisa Kituyi, Secretary-General of UNCTAD, at the eighty-eighth meeting of the Development Committe held on October 12, 2013.
... See More + He starts describing briefly about economic recovery taking hold in developed countries and with it a return to 'normality' for the world economy. In reality, that recovery is uneven and timid. Global output growth will barely exceed 2 percent in 2013, measured at constant 2005 dollars, little changed from last year`s weak performance. With a growth rate of around 4.5 percent, developing countries will continue to make the largest contribution, accounting for two thirds of global growth; transition economies will grow at around 2.5 percent, while developed economies will grow slightly above 1 percent. The growth in international trade has also slowed sharply since 2010, to less than 2 percent in volume this year, compared to an average of 7-8 percent in the pre-crisis years. Unemployment performance has fared better in developing countries: among the G-20 emerging economies, only Mexico and South Africa had higher rates of unemployment at the end of 2012 than before the crisis: all the other countries managed to reduce that rate. However, in many developing countries the quality of employment has not improved, with underemployment and informal sector jobs persistent structural challenges. However, and even though the increased weight, in recent years, of developing countries in global output, trade, Foreign Direct Investment (FDI) and capital flows has been concentrated in a small number of them, this shift opens up new possibilities.
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This paper studies how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigates whether this effect depends on existing financial constraints.
... See More + The empirical analysis relies on export data for more than 100,000 Chinese exporters over the 2000-6 period. The results confirm a trade-deterring effect of RER volatility. Firms' decision to begin exporting and the exported value decrease for destinations with higher exchange rate volatility; besides, this effect is magnified for financially vulnerable firms. As expected, financial development seems to dampen this negative impact, especially on the intensive margin of export. These results provide micro-founded evidence suggesting that the existence of well-developed financial markets allows firms to hedge exchange rate risk. The results also support a key role of financial constraints in determining the macro impact of RER volatility on real outcomes.
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Policy Research Working Paper WPS6638 OCT 01, 2013
This Africa's pulse newsletter includes the following headings: economic prospects for Sub-Saharan Africa remain strong, but growth is vulnerable to a sharp decline in commodity prices; the region's progress on reducing poverty has been slow, hindered by high inequality; and faster reduction in poverty will require growth with equity.
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In recent years, the term "middle-income trap" has entered common parlance in the development policy community. The term itself often has not been precisely defined in the incipient literature.
... See More + This paper discusses in more detail definitional issues on the so-called middle-income trap. The paper presents evidence in terms of both absolute and relative thresholds. To get a better understanding of whether the performance of the middle-income trap has been different from other income categories, the paper examines historical transition phases in the inter-country distribution of income based on previous work in the literature. Transition matrix analysis provides little support for the idea of a middle-income trap. Analysis of cross-country patterns of growth provides additional support for the conclusions in the paper, which closes with a general discussion of potential policy implications.
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Policy Research Working Paper WPS6594 SEP 01, 2013