30 June 2010

Secession and the State in Africa

Over at Let a Thousand Nations Bloom, Patri Friedman [Milton’s grandson and Seasteader] and friends are holding their second-annual “secession week” in an attempt to re-brand the US independence as an act of secession.

Here is their pro-secessionist theory in a nutshell. More states gives people more choice – greater option for exit – and this greater competition leads to better government.

How does this apply to Africa? Claudia Williamson makes the case to “Let fake states fail: Anarchy as a viable solution to artificial states”. I’m not entirely convinced on Somalia being a great poster child for anarchy. But letting fake states fail?

Sorry Congo, I know it is your 50th birthday today, but I have to agree with Jeffrey Herbst.

The international community needs to recognize a simple, albeit brutal fact: The Democratic Republic of the Congo does not exist.

The UN seal of approval to statehood is so arbitrary! Would somebody please recognise Somaliland?! They have bi-o-met-ric pass-ports – and have just conducted what seems to be a reasonable election in which the opposition stand a chance of winning.

Gaddafi made some waves a few months ago by calling for Nigeria to be carved up. So are more states the answer? Loomnie was skeptical for Nigeria.

Paul Collier is skeptical more generally. In his Political Economy of Secession he takes a predictable “small romantic rebel groups are not so romantic” refrain.

There are of course problems with his statistical analysis (and some new more sophisticated GIS analysis is refuting his findings), but he is still essential reading.

if our analysis is broadly correct, secessionist movements should not  in general be  seen  as  cries  for  social justice. Those  few secessionist movements  that  are  able  to scale-up to being organizations with a serious political or military capability are likely to occur in rich regions and contain an  element of a ‘resource grab’. They may also reflect the  fantasies of  diasporas settled  in  rich  countries  and  a  poorly educated  population. Secessionist organizations are usually built on the foundations of romantic localism, and this will  continue  to shape  their  discourse. However,  such  localism is  found  almost everywhere.  That  viable  secessionist organizations  are  rare indicates  that  romantic localism,  and  its associated discourse of grievance,  is not by itself decisive. Romantic localism is not necessarily dishonest or irrelevant, but it offers a misleading explanation for  what makes a secessionist organization strong.

If  the  cocktail  of  natural  resource wealth, diasporas, and  illiteracy  succeeds  in dismembering large,  multi-cultural developing  and  transition  societies,  the  world  is unlikely to become a safer place. The secession of Eritrea from Ethiopia, heroic as  it was, has not resulted in peace. It transformed a civil war into an international war, with a huge escalation in human and economic costs. It also has created a nation of 50 million people without direct access to the sea. 

Nor  are  the  small  new  societies  that  are  created  by secession necessarily  internally cohesive.  In Eritrea,  the President  recently arrested around half of  the members of his cabinet. East Timor has sixteen different political parties, one for every 50,000 people. It would surely be disturbing if, at the same time as developed countries were integrating as never before, developing countries were disintegrating  into tiny but disputatious ethnic theme parks.

And as for Southern Sudan next January? Well firstly as Douglas Johnson said at the University of Juba last week, an independent Southern Sudan would not become a land-locked country, because that is what it always has been. 

Secondly, I’m with Salva Kiir. Let the people vote for what they want.

Motivating kids

I mentioned a while ago some J-PAL research on the impact of providing information on the returns to education on school enrolment rates in Madagscar. It turns out the same thing works in the US.

How do we motivate kids — especially kids in rough situations — to want education? Researchers at the University of Michigan studied middle school students in Detroit and found that, while almost 90 percent expected to go to college, only half wanted a career that actually required education. And this difference was critical. Students whose career goals did not require education (e.g., sports star, movie star) spent less time on homework and got lower grades. The good news is that the researchers found it was easy to make education more salient, and thereby motivate kids. When students were shown a graph depicting the link between education and earnings, they were much more likely to hand in an extra-credit homework assignment the next day than if they were shown a graph depicting the earnings of superstars.

Kevin Lewis at the Boston Globe on:

Destin, M. & Oyserman, D., “Incentivizing Education: Seeing Schoolwork as an Investment, Not a Chore,” Journal of Experimental Social Psychology (forthcoming) 

29 June 2010

Donors: An abusive spouse?

The G8’s relationship with aid recipients in the developing world is that of a dysfunctional and abusive spouse. It promises good behaviour, reneges and then vows to be better next time.

Alan Beattie in the FT, Via Bill Easterly

28 June 2010

7 ways to overcome the natural resource curse

A new survey article by Jeffrey Frankel at Harvard concludes with a list of promising ideas for overcoming the natural resource curse and achieve good economic performance.

1. Indexation of oil contracts – Contracts between oil companies and governments could easily (but usually don’t) have explicit clauses to deal with global price volatility - sharing the downside and upside risk.

2. Hedging of export proceeds – Simply buy insurance against low oil prices, like the Government of Mexico has done. Easy.

3. Denomination of debt in terms of oil – i.e. promise to repay a quantity of oil rather than a dollar amount. This insures the borrowing government and transfers the price-risk to the lender.

4. Chile-style fiscal rules – Chile managed to save its copper boom and spend its way through the global recession by having an independent fiscal panel make assessments of the medium-term price and output gap – and tell the government how much they were allowed to spend.

5. A monetary target that emphasizes product prices – If the Central Bank has greater political independence than government coffers, monetary policy could be geared towards building up higher-than-otherwise-desirable stocks of foreign currency reserves – in order to ensure the savings aren’t raided.

6. Transparent commodity funds – The challenge is in the transparent part.

7. Lump-sum distribution – Last but not least, my favourite. Just give people the money.

27 June 2010

Will the UK austerity budget sink the Tories?

Probably not.

The conventional wisdom about the political economy of fiscal adjustments goes more or less as follows.  Deficit reduction policies cause recessions which (in addition to the direct political costs of tax increases and spending cuts) create political problems for incumbent governments.

Fortunately the accumulated evidence paints a different picture.  First of all, not all fiscal adjustments cause recessions.  Many even sharp reductions of budget deficits have been accompanied and immediately followed by sustained growth rather than recessions even in the very short run.  These are the adjustments which have occurred on the spending side and have been large, credible and decisive.  Second and this is most likely a consequence of the first point, it is far from automatic that governments which have reduced deficits have been routinely not reappointed. Governments which have initiated thorough and successful fiscal adjustment policies have not systematically suffered at the polls.  This has been especially the case when the electorate has perceived the sense of urgency of a crisis or in some cases in the presence of an external commitment.   On the contrary fiscally loose governments have suffered losses at the polls.

Alberto Alesina, Fiscal adjustments: lessons from recent history, April 2010

Hyperlinked research

To betray my utter geekiness (as if I haven’t done that already), I just got very excited when I opened this CGD working paper by Michael Clemens and saw hyperlinks on all the references. Imagine that! To my disappointment the links in the text only lead to the full citation in the bibliography. But really, in this day and age, why on earth don’t all academic papers come with embedded links to online versions of their sources?

Contract teachers in India

New evidence on the effectiveness of contract vs regular teachers in India:

We find that despite being paid  just a third of the salary of regular teachers with similar observed characteristics, contract teachers produce higher student learning. 

Let’s all say it together: Incentives matter

CSAE WPS/2010-15, The relative effectiveness and costs of contract and regular teachers in India, Paul Atherton and Geeta Kingdon

26 June 2010

Making Poverty History in Southern Sudan

How much would it cost to lift everyone in Southern Sudan above the poverty line? The answer is the triangle to the left of the red poverty line and beneath the blue population distribution line.
That triangle (apparently also known as the poverty gap - why didn’t I pay more attention in class!), is roughly equivalent to SDG 1.8 billion, or $750 million at official rates.
So in theory it would cost an annual $750 million to eradicate poverty in Southern Sudan.
The value of aid spending in Southern Sudan in 2010?
$739 million.
The value of the GoSS 2010 Budget?
SDG 4.5 billion ($1.9 billion)
Just saying.
National Baseline Household Survey, 2009
The GoSS Donor Book, 2010
The GoSS 2010 Budget-at-a-glance

25 June 2010

Bad sentences

Security is a precondition for development and must be prioritised after conflict, but achieving this can sometimes be at the cost of accelerated development.

???. A poor choice of words from the DFID press room…

23 June 2010

Best (Worst?) Juba t-shirt slogan seen this week:


HOME is HOPE built

in my HEART


What the *? Doesn’t even come close to OBAMA.

21 June 2010

Kenya fact of the day

11% of Kenya's GDP is transferred annually over cell phones (HT: Watson).

Or is it?

Since its inception [2007], the cumulative value of the money transferred via M-Pesa was over US$3.7 billion -- almost 10 percent of Kenya’s annual GDP (Safaricom, 2009). Aker and Mbiti

So somewhere between 4% and 11% then. Still not to be sniffed at.

Southern Sudan stat of the day

A few months ago the Ministry of Legal Affairs began a business registration exercise. Over 9,000 businesses were registered, of which 65% were in construction.

19 June 2010

New evidence on the importance of within country migration

Yeah, yeah, I’m a bit of a migration-policy-radical, open our borders and all that. But it isn’t even just international migration which is important for poverty reduction. A new paper by Kathleen Beegle, Joachim De Weerdt, and Stefan Dercon finds that even within Tanzania “migration adds 36 percentage points to consumption growth.”

Economic mobility is strongly linked to geographic mobility. The puzzle is why more people do not move if returns to geographic mobility are high.

Furthermore, the further you go, the greater the gains. The following chart shows the gains in consumption between 1991 and 2004 for people moving within their community, to a nearby community, to a slightly further community, or to a different district altogether. The gains are far higher for people moving out of their home district to elsewhere in Tanzania.


HT: Soon-to-be-Stefan’s-newest-Phd-student?

In which Mickey Mouse sells amphetamines to Africans

….Yes you read that correctly. This is what kids’ comics looked like in 1951. They don’t make ‘em like they used to. 






HT: Kash Ramli

Poverty Figures for Southern Sudan

The full report is now available to download from the GoSS website.

This figure shows consumption by State. Upper Nile is the richest, being the State closest to Khartoum and with the best trading links to the North, followed by Central Equatoria, home of GoSS in Juba. The poorest states are in Bahr el Ghazal, presumably due to being the most remote from both Uganda/Kenya and Northern Sudan.


Consumption is unsurprisingly higher in urban than rural areas. The poor spend very little on anything besides food. The non-poor also spend a lot on food. Their main non-food expenditure is on transportation, demonstrating the importance of connectivity.


The SSCCSE is planning a series of reports looking into the data on education, health and agriculture. I can’t wait. You can see what is possible from the survey questionnaire, attached to the report.

18 June 2010

The Child Labour Market in Juba

This chart comes from a fascinating new report on Child workers in Juba.

Economic Activities of Children working on the streets in Juba.


I’m really torn on whether it is a good idea to give money to these kids or not. They are usually around outside the Ministries washing cars, and polishing shoes at the local cafes. It seems like a classic aid problem of weighing the direct benefit vs the indirect harm. Is the meal today worth more than the disincentive to attend school?

I’ve tried to do a bit of homework (er, googling), and one of the foremost experts on the economics of child labour seems to be Kaushik Basu, previously a professor at Princeton and now Chief Economic Adviser to the Government of India (he has written a book on the subject – see here for the review on Marginal Revolution). Sadly though all I can really find are government policy recommendations, with no suggestions for the concerned individual (although there are some general concerns about potentially perverse impacts of well-meaning trade boycotts at the national level.

Any ideas?

Finally back to that report. It doesn’t tell us how many of their interviewees just work on the streets, and how many live there too. It doesn’t tell us how the questions were worded. It doesn’t have any cross-tabulations. Next time I would recommend paying a visit to the SSCCSE for some statistical advice.

17 June 2010

New Poverty figures for Southern Sudan

The Southern Sudan Centre for Census, Statistics, and Evaluation (SSCCSE – yes its a bit of a tongue-twister, but still probably easier to say and remember than the SSFFAMC), released yesterday the results of the first ever nationally representative household survey in Southern Sudan.

The headline to note is that “poverty” is considerably lower than previously estimated. In 2005 somebody licked their finger and stuck it in the air, and decided that probably about 90% of the population was living below a poverty line of $1 a day. This figure then got quoted and repeated in the opening paragraph of every report written since. Back to the drawing-board guys.

The new poverty line (based on a basic calorific intake plus a bit of non-food consumption) is SDG 73 per month – roughly a dollar a day at official market exchange rates (but a bit less at actual unofficial market exchange rates).

50% of the population falls below this poverty line.

Average consumption is SDG 100 per month.

More to come as soon as I can find an online version I can link to.

And does anyone at SSCCSE want to comment?

15 June 2010

Randomisation done right

Probably the primary criticism of randomised control trials (RCTs) is that although they prove something very well in one context, the findings aren’t necessarily transferable to another context.

Another major criticism is that they tell you what happened but not necessarily how it happened.

To solve both of these problems what you need is theory. There is of course nothing intrinsic to doing an RCT which precludes also using this evidence to test or develop a theory.

Two new papers by leading researchers in this field do just this:

A BREAD Working Paper by Karlan, McConnell, Mullainathan, and Zinman explains why reminders to save are so effective, and a Working Paper by Duflo, Hanna and Ryan explains why financial incentives are effective at getting teachers to turn up.


Getting to the Top of Mind: How Reminders Increase Saving

We develop and test a simple model of limited attention in intertemporal choice … We find support for [the model’s] predictions in three field experiments that randomly assign reminders to new savings account holders.


Incentives Work- Getting Teachers to Come to School

We use a randomized experiment and a structural model to test whether monitoring and financial incentives can reduce teacher absence and increase learning in rural India.

The Campaign for Southern Sudanese Independence begins


Some great photos by Pete Muller

14 June 2010

World Cup Fever hits Southern Sudan

Never mind, England. In other World Cup news, my house is now flooded with the sound of vuvuzelas from all of the neighbours’ TV sets, and I am trying to bring some British culture to my Sudanese colleagues in the office with some irresponsible gambling (er, sweepstake, for.. team-building and stuff).

And here is Karuna Herrmann on a recent trip to Wau:

People in developing countries tend to have an impressive grasp of all things football – league and national. Not so my driver in Wau.
A: Tab3an I will watching World Cup!
K: Who do you want to win?
A: ManU!
...K: I’m afraid they didn’t qualify.
A: ManU is very good!
K: Yes, but the World Cup is for national teams.
A: . . .
K: It’s for the teams of countries.
A: . . .
K: ManU is not a country.

04 June 2010

Bad News Friday

My nemesis the Stationary Bandit notes that the economy of Botswana shrank last year.

Last year's economic performance was not good.

  • Botswana’s economy contracted by 6.7 percent last year as revenue from diamonds plummeted, Central Bank Governor Linah Moholo said.

This succinctly summarizes the problem for Botswana. Although its growth record for decades has been impressive, it remains too undiversified.  Diamonds and cattle remain large sectors of the economy.  When diamond revenues plummet, the economic consequences are severe.  Add in the HIV/AIDS situation with a contracting economy can quickly turn an African success story into another African Growth Tragedy.

I’m going to get drunk.

03 June 2010

Constraints to medium-sized firm growth

The World Bank’s “Doing Business” reports assess the ease of doing business in different countries, by comparing policies and regulation. It is a fascinating exercise, but one which is based upon an implicit assumption that these rules matter, and that they are binding.

A new NBER working paper by Mary Hallward-Driemeier, Gita Khun-Jush, and Lant Pritchett argues that in Africa, policies and regulations are typically not very well implemented, meaning that deals are more important to firms than rules.

We argue that often firms in Africa do not cope with policy rules, rather they face deals; firm-specific policy actions that can be influenced by firm actions (e.g. bribes) and characteristics (e.g. political connections).  Using Enterprise Survey data we demonstrate huge variability in reported policy actions across firms notionally facing the same policy.   The within-country dispersion in firm-specific policy actions is larger than the cross-national differences in average policy … Finally, we show that the de jure measures such as Doing Business indicators are virtually uncorrelated with ex-post firm-level responses, further evidence that deals rather than rules prevail in Africa.

The constraints reported by 3317 firms in 13 countries are shown in the Figure below. The point being made is that policy uncertainty is much more important than licences or customs clearance, but I am also pretty stunned by the reported importance of electricity.


Net-migration bubble map


From: Growthology.org

The Guardian to stop printing by 2015?

More on the economics of newspapers:

Peter Kirwan at  wired.co.uk has pieced together some numbers and estimates that the Guardian’s online ad revenues could be enough to entirely funding its reporting and editorial operations by 2015.

[£40m] is the number budgeted for overall digital revenues at GNM [Guardian News & Media] during the year to March 2011.

GNM expects to boost its digital revenues by around 30 percent in the space of a year.

I’ve used a range of more realistic growth rates to estimate how long it might take GNM’s digital operations to earn the £100m required to keep a decent-sized newsroom operating seven days a week.

At 10 percent annualised growth, the target date is 10 years away, in 2020.

At 15 percent, it’s seven years away, in 2017.

At 20 percent, it’s five years away, in 2015.

I need an iPad now.

02 June 2010

The “missing middle”

The failure of microfinance to have a large impact on firm creation and firm growth (Banerjee et al. 2009; Karlan and Zinman 2009; a summary by FT) may be due to its targeting of poor people and small-scale firms. It is medium to large scaled firms that are missing in less developed countries (LDCs) if the firm size distribution is compared to the one from developed countries (Hsieh and Klenow 2009), and that type of firms is probably the driver of economic growth. Governments in LDCs and development assistance agencies, however, have ignored these medium and large scaled firms.

That is Abhijit Banerjee talking at the Annual Bank Conference on Development Economics.

I suppose medium scaled firms just aren’t as sexy as a single female entrepreneur. Perhaps we need a catchy name for support to mid-sized firms. “Middle-finance”? “Medium-finance?” “Meso-finance?” Melody Atil is trying to plug this gap in Southern Sudan by recruiting investors for slightly larger firms.

Then again financing might not even be the main constraint to firm growth…

01 June 2010

The Curious Economics of the Newspaper Business

newspapers typically spend about 15 percent of their revenue on what, to the Internet world, are their only valuable assets: the people who report, analyze, and edit the news. Varian cited a study by the industry analyst Harold Vogel showing that the figure might reach 35 percent if you included all administrative, promotional, and other “brand”-related expenses. But most of the money a typical newspaper spends is for the old-tech physical work of hauling paper around. Buying raw newsprint and using it costs more than the typical newspaper’s entire editorial staff.

The Atlantic