Our Research: Full Index

  Back to Research Home

Reliving the 50s: the Big Push, Poverty Traps, and Takeoffs in Economic Development

  |  

he classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income -- has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce . . .

Are Aid Agencies Improving?

  |  

The record of the aid agencies over time seems to indicate weak evidence of progress over time in response to learning from experience, new knowledge, or changes in political
climate. The few positive results are an increased sensitivity to per capita income of the recipient (although it happened long ago) a decline in the share of food aid, and a decline in aid tying. Most of the other evidence -- increasing donor fragmentation, unchanged emphasis on technical assistance, little or no sign of increased selectivity with respect to policies and institutions, the adjustment lending-debt relief imbroglio -- suggests an unchanged status quo, lack of response to new knowledge, and repetition of past mistakes.
William Easterly

U.S. Environmental Regulation and FDI: Evidence from a Panel of U.S. Based Multinational Firms

  |  

This paper measures the response of U.S. based multinational firm to the Clean Air Act Amendments (CAAA), which dramatically strengthened U.S. environmental regulation. Using a panel of firm-level data over the period 1966-1999, I estimate the effect of regulation on a multinational’s foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firm, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firm to increase their foreign assets by 5.3% and their foreign output by 9% . . . 

Planners vs. Searchers in Foreign Aid

  |  

Only for the recipients of foreign aid is something akin to central planning seen as a way to achieve prosperity. The end of poverty is achieved with free markets and democracy—where decentralized “searchers” look for ways to meet individual needs—not Poverty Reduction Strategy Papers (PRSPs) to achieve Millennium Development Goals (MDGs). The PRSPs and MDGs create lots of bureaucracy but hold no one specific agency in foreign aid accountable for any one specific task. Planners in foreign aid use the old failed models of the past . . .
William Easterly

Reliving the 50s: the Big Push, Poverty Traps, and Takeoffs in Economic Development

  |  

The classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased aid and investment, leading to a takeoff in per capita income -- has been very influential in development economics since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce . . .
William Easterly, NYU

Social Cohesion, Institutions, and Growth

  |  

Policy and institutional quality are to a large extent endogenous. While the truth of this statement is familiar to most development scholars, the implications of it have drawn relatively little empirical attention. Understanding more about this relationship matters, because ‘‘poor institutional quality’’ and ‘‘failure to implement better policies’’ are so frequently identified as the causes of growth collapses, endemic poverty, and civil conflict.
William Easterly, Jo Ritzen, and Michael Woolcock

Does Corruption Produce Unsafe Drivers?

  |  

We follow 822 applicants through the process of obtaining a driver’s license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to three groups: “bonus,” “lesson” and comparison groups. In the bonus group, participants were offered a financial reward if they could obtain their license fast; in the lesson group, participants were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several findings about corruption emerge. First, the bureaucracy is responsive to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. However, the bureaucracy is insensitive to social needs . . . 
Marianne Bertrand, University of Chicago Graduate School of Business, NBER, CEPR and IZA; Simeon Djankov, International Finance Corporation and CEPR; Rema Hanna, Graduate School of Public Service, New York University; Sendhil Mullainathan, Harvard University and NBER

Development, Democracy, and Mass Killings

  |  

Using a newly assembled dataset spanning from 1820 to 1998, we study the relationship between the occurrence and cruelty of episodes of mass killing and the levels of development and democracy across countries and over time. We find that massacres are more likely at intermediate levels of income and less likely at very high levels of democracy, but we do not find evidence of a linear relationship between democracy and probability of mass killings. In the XXth century, discrete improvements in democracy are systematically associated with less cruel massacre episodes. Episodes at the highest levels of democracy and income involve relatively fewer victims . . . 

Artificial States

  |  

Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures of the degree to which states are artificial. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
Alberto Alesina, Harvard University; William Easterly, NYU; Janina Matuszeski, Harvard University

The Big Push Déjà vu: A Review of Jeffrey Sachs’s The End of Poverty: Economic Possibilities for Our Time.

  |  

Jeffrey Sachs is the economics profession’s leading advocate of mega-reform. Whether it is stabilization of hyperinflation in Bolivia, shock therapy to leap from Communism to capitalism in Poland and Russia, or a “Big Push” to end world poverty , Sachs’ recommendation throughout his career has been to do it fast, do it big, do it comprehensively, and do it with lots of Western money . . .
William Easterly