Showing papers by "William Easterly published in 2008"

Where Does the Money Go? Best and Worst Practices in Foreign Aid

Abstract: This paper does not address the issue of aid effectiveness -- that is, the extent to which foreign aid dollars actually achieve their goals -- but on "best practices" in the way in which official aid is given, an important component of the wider debate. First we discuss best practice for an ideal aid agency and the difficulties that aid agencies face because they are typically not accountable to their intended beneficiaries. Next we consider the transparency of aid agencies and four additional dimensions of aid practice: specialization, or the degree to which aid is not fragmented among too many donors, too many countries, and too many sectors for each donor); selectivity, or the extent to which aid avoids corrupt autocrats and goes to the poorest countries; use of ineffective aid channels such as tied aid, food aid, and technical assistance; and the overhead costs of aid agencies. We compare 48 aid agencies along these dimensions, distinguishing between bilateral and multilateral ones. Using the admittedly limited information we have, we rank the aid agencies on different dimensions of aid practice and then provide one final comprehensive ranking. We present these results as an illustrative exercise to move the aid discussion forward.

Can the West Save Africa

Abstract: In the new millennium, the Western aid effort towards Africa has surged due to writings by well-known economists, a celebrity mass advocacy campaign, and decisions by Western leaders to make Africa a major foreign policy priority. This survey contrasts the predominant "transformational" approach (West saves Africa) to occasional swings to a "marginal" approach (West takes one small step at a time to help individual Africans). Evaluation of "one step at a time" initiatives is generally easier than that of transformational ones either through controlled experiments (although these have been much oversold) or simple case studies where it is easier to attribute outcomes to actions. We see two themes emerge from the literature survey: (1) escalation. As each successive Western transformational effort has yielded disappointing results, the response has been to try an even more ambitious effort. (2) the cycle of ideas. Rather than a progressive testing and discarding of failed ideas, we see a cycle in aid ideas in many areas in Africa, with ideas going out of fashion only to come back again later after some lapse long enough to forget the previous disappointing experience. Both escalation and cyclicality of ideas are symptomatic of the lack of learning that seems to be characteristic of the "transformational" approach. In contrast, the "marginal" approach has had some successes in improving the well-being of individual Africans, such as the dramatic fall in mortality.

Was the Wealth of Nations Determined in 1000 B.C.

Abstract: We assemble a dataset on technology adoption in 1000 BC, 0 AD, and 1500 AD for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Our strong and robust results are for 1500 AD determining per capita income today. We find technological persistence across long epochs: from 1000 BC to 0 AD, from 0 AD to 1500 AD, and from 1500 AD to the present. Although the data allow only some suggestive tests of rival hypotheses to explain long - run technological persistence, we find the evidence to be most consistent with a model of endogenous technology adoption where the cost of adopting new technologies declines sufficiently with the current level of adoption. The evidence is less consistent with a dominant role for population as predicted by the semi - endogenous growth models or for country - level factors like culture, genes or institutions.

Institutions: Top Down or Bottom Up?

Abstract: A large research program in economics has established a persuasive link between institutions and economic development. But what does this imply for development policymaking? Can a political leader or aid agency seeking to promote development readily change institutions? This article starts off wildly general, and then moves to specifics.

Reinventing foreign aid

Abstract: The urgency of reducing poverty in the developing world has been the subject of a public campaign by such unlikely policy experts as George Clooney, Alicia Keyes, Elton John, Angelina Jolie, and Bono. And yet accompanying the call for more foreign aid is an almost universal discontent with the effectiveness of the existing aid system. In Reinventing Foreign Aid, development expert William Easterly has gathered top scholars in the field to discuss how to improve foreign aid. These authors, Easterly points out, are not claiming that their ideas will (to invoke a current slogan) Make Poverty History. Rather, they take on specific problems and propose some hard-headed solutions. Easterly himself, in an expansive and impassioned introductory chapter, makes a case for the "searchers" -- who explore solutions by trial and error and learn from feedback -- over the "planners" -- who throw an endless supply of resources at a big goal -- as the most likely to reduce poverty. Other writers look at scientific evaluation of aid projects (including randomized trials) and describe projects found to be cost-effective, including vaccine delivery and HIV education; consider how to deal with the government of the recipient state (work through it or bypass a possibly dysfunctional government?); examine the roles of the International Monetary Fund (a de-facto aid provider) and the World Bank; and analyze some new and innovative proposals for distributing aid. Contributors Abhijit Banerjee, Nancy Birdsall, Craig Burnside, Esther Duflo, Domenico Fanizza, William Easterly, Ruimin He, Kurt Hoffman, Stephen Knack, Michael Kremer, Mari Kuraishi, Ruth Levine, Bertin Martens, John McMillan, Edward Miguel, Jonathan Morduch, Todd Moss, Gunilla Pettersson, Lant Pritchett, Steven Radelet, Aminur Rahman, Ritva Reinikka, Jakob Svensson, Nicolas van de Walle, James Vreeland, Dennis Whittle, Michael Woolcock.

Where Does the Money Go? Best and Worst Practices in Foreign Aid

Abstract: This paper does not address the issue of aid effectiveness - that is, the extent to which aid dollars actually achieve their goals - but instead focuses on best practices in the way in which official aid is given, an important component of wider debate. First, we discuss best practice for an ideal aid agency and the difficulties that aid agencies face because they are typically not accountable to their intended beneficiaries. Next, we consider the transparency of aid agencies and four additional dimensions of aid practice: specialization, or the degree to which aid is not fragmented among too many donors, too many countries, and too many sectors for each donor; selectivity, or the extent to which aid avoids corrupt autocrats and goes to the poorest countries; use of ineffective aid channels such as tied aid, food aid, and technical assistance; and the overhead costs of aid agencies. We compare 48 aid agencies along these dimensions, distinguishing between bilateral and multilateral ones. Using the admittedly limited information we have, we rank the aid agencies on different dimensions of aid practice and then provide one final comprehensive ranking. We present these results as an illustrative exercise to move the aid discussion forward.

Is the Brain Drain Good for Africa

Abstract: We build upon recent literature to do several exerc ises to assess benefits and costs of the brain drai n to Africa. Contrary to a lot of the worries expressed in the media and in aid agencies, the Brain drain i s probably a net benefit to the source countries. We make several arguments: (1) the African brain drain is not large enough to have much effect on Africa’s skill gap relative to the rest of the world. Since other regions had a larger brain drain, the skill g ap between Africa and the rest would actually be larger in a counterfactual world of NO brain drain with the same amount of skill creation. (2) The gains to the migrants themselves and their families who receive indirect utility and remittances more than offset the losses of the brain drain. Accordin g to one of our calculations, the present value of remittances more than covers the cost of educating a brain drainer in the source country. (3) Brain drain has a positive effect on skill accumulation t hat appears to offset one for one the loss of skill s to the brain drain. Hence it is not surprising that we fail to identify any negative growth effect of the brain drain. Although some of our exercises are re liant on special assumptions and shaky data that require further investigation, we conclude based on what we can know in this paper that the brain drain is on balance good for Africa 1

Development Economics through the Decades: A Critical Look at Thirty Years of the World Development Report

Abstract: The World Development Report (WDR) has become such a fixture that it is easy to forget the circumstances under which it was born and the Bank's motivation for producing such a report at that time. In the first chapter of this essay, the authors provide a brief background on the circumstances of newly independent developing countries and summarize some of the main strands of the emerging field of development economics. This backdrop to the genesis of the WDR accounts for the orientation of the earlier reports. The thinking on development in the 1960s and 1970s also provides a baseline from which to view the evolution that has occurred since. From the coverage in the second chapter, the authors isolate a number of key issues common to several or all of the WDRs, and the author examine these issues individually at greater length in third chapter. The discussion in third chapter, which builds on the material in the WDRs, presents some views about how far development thinking and, relatedly, policy making have advanced relative to 30 years ago. It asks whether promoting growth, building institutions, tackling inequality and poverty, making aid effective, and defining the role of the state have been rendered more tractable policy wise by the knowledge encapsulated in the WDRs. Chapter four looks ahead and points to some of the big challenges that the Bank might explore through future WDRs and the value it can add through the knowledge acquired from its cross-country operations and research.

Empirics of Strategic Interdependence: The Case of the Racial Tipping Point

Abstract: The Schelling model of a “tipping point” in racial segregation, in which whites flee a neighborhood once a threshold of nonwhites is reached, is a canonical model of strategic interdependence. The idea of “tipping” explaining segregation is widely accepted in the academic literature and popular media. I use census tract data for metropolitan areas of the US from 1970 to 2000 to test the predictions of the Schelling model and find that this particular model of strategic interaction largely fails the tests. There is more “white flight” out of neighborhoods with a high initial share of whites than out of more racially mixed neighborhoods.

Superpower interventions and their consequences for democracy: an empirical inquiry

Abstract: Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on democracy after a few years is far from obvious. The absence of reliable information on covert interventions has hitherto served as an obstacle to seriously addressing these questions. The recent declassification of Cold War CIA and KGB documents now makes it possible to systematically address these questions in the Cold War context. We thus develop a new panel dataset of superpower interventions during the Cold War. We find that superpower interventions are followed by significant declines in democracy, and that the substantive effects are large. Perhaps surprisingly, once endogeneity is addressed, US and Soviet interventions have equally detrimental effects on the subsequent level of democracy; both decrease democracy by about 33%. Our findings thus suggest that one should not expect significant differences in the adverse institutional consequences of superpower interventions based on whether the intervening superpower is a democracy or a dictatorship.

Can the West Save Africa

Abstract: In the new millennium, the Western aid effort towards Africa has surged due to writings by well-known economists, a celebrity mass advocacy campaign, and decisions by Western leaders to make Africa a major foreign policy priority. This survey contrasts the predominant "transformational" approach (West saves Africa) to occasional swings to a "marginal" approach (West takes one small step at a time to help individual Africans). Evaluation of "one step at a time" initiatives is generally easier than that of transformational ones either through controlled experiments (although these have been much oversold) or simple case studies where it is easier to attribute outcomes to actions. We see two themes emerge from the literature survey: (1) escalation. As each successive Western transformational effort has yielded disappointing results, the response has been to try an even more ambitious effort. (2) the cycle of ideas. Rather than a progressive testing and discarding of failed ideas, we see a cycle in aid ideas in many areas in Africa, with ideas going out of fashion only to come back again later after some lapse long enough to forget the previous disappointing experience. Both escalation and cyclicality of ideas are symptomatic of the lack of learning that seems to be characteristic of the "transformational" approach. In contrast, the "marginal" approach has had some successes in improving the well-being of individual Africans, such as the dramatic fall in mortality.

Superpower Interventions and Their Consequences for Democracy

Abstract: Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on democracy after a few years is far from obvious The absence of reliable information on covert interventions has hitherto served as an obstacle to seriously addressing these questions The recent declassification of Cold War CIA and KGB documents now makes it possible to systematically address these questions in the Cold War context We thus develop a new panel dataset of superpower interventions during the Cold War We find that superpower interventions are followed by significant declines in democracy, and that the substantive effects are large Perhaps surprisingly, once endogeneity is addressed, US and Soviet interventions have equally detrimental effects on the subsequent level of democracy; both decrease democracy by about 33% Our findings thus suggest that one should not expect significant differences in the adverse institutional consequences of superpower interventions based on whether the intervening superpower is a democracy or a dictatorship

Reply to Brendan Beare

Abstract: This is our reply to Brendan Beare’s comment on our paper. While we find his criticism to be both valid and helpful, a modified version of our original model still confirms that a low elasticity of substitution between capital and labor doomed the Soviet strategy of extensive growth through capital accumulation.

Superpower Interventions and their Consequences for Democracy: An Empirical Inquiry

Abstract: Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on democracy after a few years is far from obvious. The absence of reliable information on covert interventions has hitherto served as an obstacle to seriously addressing these questions. The recent declassification of Cold War CIA and KGB documents now makes it possible to systematically address these questions in the Cold War context. We thus develop a new panel dataset of superpower interventions during the Cold War. We find that superpower interventions are followed by significant declines in democracy, and that the substantive effects are large. Perhaps surprisingly, once endogeneity is addressed, US and Soviet interventions have equally detrimental effects on the subsequent level of democracy; both decrease democracy by about 33%. Our findings thus suggest that one should not expect significant differences in the adverse institutional consequences of superpower interventions based on whether the intervening superpower is a democracy or a dictatorship.