Célestin Monga and Justin Yifu Lin
This introductory chapter of the second volume of the Handbook discusses Africa’s changing economic policy and institutional frameworks, and presents the ways forward. It starts with a chronicle of the rise and fall of the main economic strategies adopted by most African countries after independence, and highlights their rationale and shortcomings. It then draws some lessons to be learned from failures and successes, and stresses the inappropriate tendency of African policymakers to take as reference models the most advanced economies and try to replicate their strategies and policies mimetically. It argues that economic policy in developing countries be primarily conceived as an exercise of strategic selection, and concludes by insisting on the need for humility in the quest for relevant knowledge.
This article attempts to identify treatments of corruption that draw on characteristics of underdevelopment either as causes or as consequences. There is a very small amount of literature (both empirical and theoretical) on corruption in the Indian context. A primary reason for the lack of empirical work is the unavailability of data: Both parties typically benefit from corruption, and, therefore, neither has an incentive to report it. The article looks at three aspects of government corruption in developing countries, and in India in particular: red tape, rent-seeking, and the abundance of intermediaries (such as middlemen). The article argues that if wasteful red tape is specifically a characteristic of public provision (not private), then provision should be privatized, as suggested by the “efficient corruption” literature. The article emphasizes that there is very little work on intermediation (and the role of intermediaries) in corruption, an analysis of which is necessary to understand the structure of corruption markets, especially in the Indian context.
Sadiq Ahmed and Ashutosh Varshney
This article aims to review India's long-term growth experience with a view to understanding the determinants of growth and the underlying political economy. The article looks specifically at the political economy of India's growth transformation from a low-growth environment (pre-1980s) to a rapid growth environment (post-1980s) and asks how sustainable the new transformation is. Following the introduction, the second section looks at the evolution of India's growth, and the third section reviews this growth experience in terms of its affect on employment and poverty. The fourth section briefly reviews the policy framework underlying this growth. The fifth section takes a political approach to understanding the process and politics of policy making in India. This framework is then applied in the next section to explain India's growth transformation. In the seventh section, the article looks at inclusiveness, which is arguably at the heart of the sustainability of economic reforms and long-term growth. Finally, some concluding remarks are provided.
This article uses data on the composition of cabinets in the presidential systems of Latin America to show variation in patterns of cabinet stability across the region. First, it reviews the existing literature on different ways to measure political stability, in particular the stability of cabinets, the causes of cabinet instability, and the link between cabinet stability and policymaking. It then provides data on patterns of cabinet stability in Latin America and on its relationship with different aspects of policymaking in the region.
Frannie A. Léautier
This article examines how capacity development can transform Africa’s economies. It begins by considering various definitions of capacity and proposing an alternative definition based on an analytical and theoretical perspective. It then describes capability-based theories using concepts from the theory of the firm and organizational performance. The article also assesses Africa’s potential to transform its unique combination of endowments by focusing on the best approach for implementing its policies and programs. In addition, it discusses the issue of accumulation of knowledge and capabilities at the individual and organizational level based on the concepts of investment in human capital. In particular, the role of education in building human capital, acquiring formal skills, and in research and innovation is highlighted. Finally, it analyses ideas from co-evolutionary dynamics, with emphasis on appropriate matching of the state’s capabilities to the challenges facing it.
Richard E. Ericson
The nature, structure, and functioning of the contemporary Russian market economy has been substantially influenced by the legacies of its predecessor, the Soviet command economy.This chapter outlines the key defining characteristics of that prior economic system and how they influenced its functioning and performance.These characteristics determined a structure of production and interaction;a critical mass of economic, political, and social institutions;and patterns ofbehavior and understanding of economic and social processes that maintained a politically effective (if economically inefficient) system.That system was destroyed by the radical reforms of the 1980s and 1990s, yet it bequeathed many structures, institutions, and behaviors that remain, in varying degrees, as legacies of the prior economic system.Their impact lingers in the structural problems faced by the Russian economy and in the policies pursued by political leadership.Understanding these legacies is important to understanding the nature and path of development of the current Russian market economy.
Ben Ross Schneider
This article argues that Latin American capitalism should be considered, firstly, as distinct from other regions and, secondly, with consequential intraregional variations. The article is organized as follows. Section 2 provides some brief background on successive attempts since the 1960s to identify distinctive features of capitalism in Latin America, especially dependency, statist, and neoliberal approaches. Section 3 then turns to an extended analysis of liberal, coordinated, network, and hierarchical capitalisms, and highlights examples of the last in Latin America. This section analyzes core components of hierarchical capitalism—family-owned business groups, multinational corporations, low skills, and anomic labor relations—that are common across most countries in Latin America. Section 4 examines how recent trends in globalization, commodity booms, and the revival of state intervention in the economy largely reinforced elements of hierarchical capitalism.
This article notes that the econometric literature on convergence has been critical of traditional growth regressions for studying economic convergence across countries and regions, based on the popular notions of β and ó convergences. This is because these methods fail to allow for unobserved (and persistent) differences across countries, and they are susceptible to measurement errors, endogeneity biases, and spatial autocorrelation. The article does two things: First, it investigates the convergence hypothesis among Indian states by using panel unit root tests that explicitly incorporate cross-sectional dependence (various socioeconomic variables in different regions in India are expected to be contemporaneously correlated). Second, two measures of well-being are used: per capita consumption—both rural and urban—and per capita state-level GDP (SGDP). Most of the studies on India are based on SGDP, which is a questionable indicator of welfare. The article also incorporates possible structural breaks that may occur and may lead to completely different outcomes of the convergence hypothesis test.
Roger B. Myerson
Decentralization and democracy may improve the chances for successful economic development. The importance of local government and democracy is evident in the history of many countries, but democratic local government has been less common in Africa than elsewhere. Democratic political competition can improve governance only if voters have a choice among qualified candidates who have good reputations for exercising power responsibly in public service. This essential supply of trusted democratic leadership can develop best in responsible institutions of local government, where successful local leaders can prove their qualifications to become strong competitive candidates for higher office. Thus, a federal constitutional structure that devolves substantial powers to autonomously elected local governments can increase the chances for successful democratic development. Foreign assistance can help to increase this vital supply of leaders with good reputations for spending public funds responsibly if some share of foreign-assistance funding is distributed directly to local governments and other local public service agencies.
Avraham Ebenstein and Ethan J. Sharygin
China has experienced an explosion in the sex ratio at birth, with 25 million more men than women younger than 20 (2005 census). This chapter examines the implications of large numbers of men failing to marry on the supply-and-demand dynamics of sex work, with a focus on how this affects the prevalence of sexually transmitted infections (STIs). The chapter begins with a history of prostitution in China and describes the massive increase in sex work following economic reforms in the late 1970s. It then analyzes the current dynamics of demand and supply for sex work in China, using national census data and detailed microdata on sex workers. The authors find a clear link between high-population sex ratios, the prevalence of sex work, and STI rates. The analysis concludes with projections for the future and a discussion of policy responses in light of an anticipated increase in sex work.
William A. Masters
This article addresses the influence of economic development and government policies on food consumption around the world. It shows how an underlying process of economic development and policy change might drive changes in food consumption. It analyzes the interacting influences in a unified framework that could help explain both diversities and similarities. To help make sense of the diverse literature and disparate facts about food consumption changes and differences across countries, this article offers a series of thought experiments about individual decision-making in economic development. It then moves directly to the evidence presented on food prices as influenced by government policies, and on households' actual food consumption choices. The economics approach to food consumption aims to explain our diverse choices in terms of a common decision-making process.
This chapter deals with economic insecurity as emanating from global economic volatility; weaknesses in domestic policies and institutions in responding to this; and structural changes that have led to increasing employment insecurity and income uncertainty at the household level. Latin America, more than most other developing regions, suffers from high degrees of economic insecurity, which has increased in recent decades with greater economic openness and a dismantling of traditional social protection systems. While societies and individuals will always have to live with a certain degree of economic uncertainty and insecurity, a high degree of this will be an impediment to development and poverty reduction. The chapter argues that much of economic insecurity can be mitigated through a proper integration of macroeconomic, industrial, labour-market, and social policies.
Akbar Noman and Joseph E. Stiglitz
The economic revival of sub-Saharan Africa follows a lost quarter century of economic collapse and deindustrialization. This examination of its causes and controversies yields important lessons for sustaining and accelerating the revival of growth about which there are real concerns. Policies that contributed to the debacle paid too little attention to “learning” and dynamic efficiency; to critical issues of pacing, sequencing, and the development of appropriate state capacity; and had too much faith in markets, especially as instruments of developmental transformation. The Good Governance Agenda that emerged is both too ambitious and too narrow, neglecting state capacities that have been so important in many successful countries. These ideas are illustrated by looking at several concrete issues. Changes occurring in the global economic landscape make it particularly opportune and urgent to place the sort of trade, industrial and financial policy reforms suggested, high on the policy agenda.
M. A. Thomas
Historically economists have turned to principal-agent models to explain corruption and expected utility models to model bribe transactions. These models depend on a definition of corruption that assumes a government with separate public and private spheres. However, the existence of separate public and private roles cannot be assumed in a number of countries, including some African countries. As political economists bridge the gap between the political science and economics literatures on corruption, bringing wider awareness of governments that hold power through the distribution of private goods to elites, traditional economic models of corruption must become more contextualized. “Africa” is not an analytically useful category for the study of corruption.
Raj M. Desai, Anders Olofsgård, and Tarik M. Yousef
This chapter examines the origin and evolution of the authoritarian bargain, or the provision of government welfare in exchange for political control, in North Africa. Following independence, North African states supported significant economic intervention and redistribution. Despite initial successes, these arrangements proved unsustainable and were to come under severe stress in subsequent decades. Fiscal austerity, along with reforms to governing social contracts, created a more durable system with its own internal logic, but also with internal contradictions. Recent upheaval in North Africa, the birthplace of the so-called Arab Spring protests, may be traced to resulting structural rigidities, coupled with the governments’ poor record in responding to a variety of crises. The recent economic history of North Africa, finally, shows how the policy mix that favors redistribution, equity, and security over growth has taken an increasing toll on precisely the social sectors it was intended to protect.
This chapter focuses on fiscal policy in Africa, with emphasis on fiscal developments over the longer term and during business cycles, the amount and allocation of government spending, the taxation system, and the quality of fiscal institutions. The chapter also considers the main challenges facing Africa’s fiscal authorities. The chapter begins by providing an overview of fiscal policies in African countries during business cycles before turning to a discussion of public finance management, public expenditure, and sources of government revenues such as taxes. The relationship between levels of government spending and levels of inequality-adjusted human development is also examined.
Mauricio Cárdenas and Guillermo Perry
Focusing on current issues, this chapter discusses four topics that distinguish Latin America from other regions, and discusses the most compelling explanations provided in the analytical literature, starting with the broad topic of fiscal state capacity in Latin America. The second topic is the well-documented pro-cyclical nature of fiscal policy in Latin America. This is a critical issue because fiscal policies should allow countries to achieve macroeconomic stability, rather than exacerbating economic fluctuations. The third topic is fiscal decentralization. Despite very low tax-revenue generation at the subnational level, government expenditures are increasingly decentralized in Latin America. The last section deals with sustainability issues. The main point is that very few countries in the region issue sovereign debt internationally rated as investment grade.
This article reviews food security measurement and its connection to policy responses in developed countries. It focuses on survey-based methods, sometimes called “third generation” measures of food security. This article discusses examples drawn from across a range of developed countries whenever possible. It presents the relationship between food insecurity and hunger definitions. It then moves on to a discussion of advantage and disadvantage of the multiple-question approach. Countries address food security through general economic policies and through more specific food assistance programs. This article deals with general economic policies including anti-poverty programs and interventions to support the low-wage labor market and concludes that developed countries associate food security with symptoms of material deprivation and social exclusion for which the primary response is the income-based social safety net more broadly.
Luiz Carlos Bresser-Pereira
This chapter adopts a historical method to compare the two competing strategies that Latin America faces today: conventional orthodoxy and new developmentalism. The second section discusses old or national developmentalism, its relation to the Latin American structuralist school of thought, and its success in promoting economic growth between 1930 and 1980. The third section discusses the causes for the demise of national developmentalism and its substitution by the Washington consensus or conventional orthodoxy. Given the failure of this alternative to promote stability and growth, the fourth section discusses the rise of structuralist development macroeconomics and new developmentalism. The fifth and sixth sections compare new developmentalism with old developmentalism, and new developmentalism with conventional orthodoxy.
Johan Swinnen and Rob Kuijpers
Understanding the development implications of agri-food standards and global value chains is crucial, as they are a fundamental component of developing countries’ growth potential and could increase rural incomes and reduce poverty, but at the same time they present serious challenges and could lead to further marginalization of the poor. This chapter reviews some of the implications of the spread of stringent standards associated with global value chains for developing countries and global poverty reduction. The chapter focuses on five aspects: the interaction between standards and value chain governance; the effects on agricultural productivity and smallholder welfare; farm-level and institutional spillovers; labor market and gender effects; and the interaction between liberalization policies and value chains.