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Abstract:
Unlike most cross-country growth analyses, we focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least eight years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political-regime changes are statistically significant predictors of growth accelerations. External shocks tend to produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. Growth accelerations tend to be highly upredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.

Economic growth, economic reform

Abstract:
Unlike most cross-country growth analyses, we focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least eight years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political-regime changes are statistically significant predictors of growth accelerations. External shocks tend produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. However, growth accelerations to be highly upredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.

International Economics, Macroeconomics, International Development

Abstract:
Unlike most cross-country growth analyses, we focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least eight years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political-regime changes are statistically significant predictors of growth accelerations. External shocks tend to produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. However, growth accelerations tend to be highly unpredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.

Abstract:
How to explain the surprising finding that more education did not lead to faster economic growth?

Cross-national data on economic growth rates show that increases in educational capital resulting from improvements in the educational attainment of the labor force have had no positive impact on the growth rate of output per worker.

In fact, contends Pritchett, the estimated impact of growth of human capital on conventional nonregression growth accounting measures of total factor productivity is large, strongly significant, and negative.

Needless to say, this at least appears to contradict the current conventional wisdom in development circles about education's importance for growth.

After establishing that this negative result about the education-growth linkage is robust, credible, and consistent with previous literature, Pritchett explores three possible explanations that reconcile the abundant evidence about wage gains from schooling for individuals with the lack of schooling impact on aggregate growth:

- That schooling creates no human capital. Schooling may not actually raise cognitive skills or productivity but schooling may nevertheless raise the private wage because to employers it signals a positive characteristic like ambition or innate ability.
- That the marginal returns to education are falling rapidly where demand for educated labor is stagnant. Expanding the supply of educated labor where there is stagnant demand for it causes the rate of return to education to fall rapidly, particularly where the sluggish demand is due to limited adoption of innovations.
- That the institutional environments in many countries have been sufficiently perverse that the human capital accumulated has been applied to activities that served to reduce economic growth. In other words, possibly education does raise productivity, and there is demand for this more productive educated labor, but demand for educated labor comes from individually remunerative but socially wasteful or counterproductive activities - a bloated bureaucracy, for example, or overmanned state enterprises in countries where the government is the employer of last resort - so that while individuals' wages go up with education, output stagnates, or even falls.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to investigate the determinants of economic growth.

Abstract:
Many oil, mineral, and plantation crop-based economies experienced a substantial deceleration of growth since the commodity boom and bust of the 1970s and early 1980s. Rodrik (1999) has demonstrated that the magnitude of a country's growth deceleration since the 1970s is a function of both the magnitude of the shocks and a country's "social capability" for adapting to shocks. In this paper, we demonstrate that in this respect countries, with what we term "point source" natural resource exports are doubly disadvantaged. Not only are countries with these types of exports exposed to terms of trade shocks, but the institutional capability for responding to shocks is itself endogenous and negatively related to export composition. Using two different sources of export data and classifications of export composition, we show that point source and coffee/cocoa exporting countries do worse across an array of governance indicators (controlling for a wide array of other potential determinants of governance). This is not just a function of being a "natural resource" exporter, as countries with natural resource exports that are "diffuse" do not show the same strong differences - and have had more robust growth recoveries.

Economic Growth, Institutions, Natural Resource Endowment

Abstract:
The relationship between household wealth and educational enrollment of children can be estimated without expenditure data. A method for doing so - which uses an index based on household asset ownership indicators - is proposed and defended in this paper. In India, children from the wealthiest households are over 30 percentage points more likely to be in school than those from the poorest households, although this gap varies considerably across states.

To estimate the relationship between household wealth and the probability that a child (aged 6 to 14) is enrolled in school, Filmer and Pritchett use National Family Health Survey (NFHS) data collected in Indian states in 1992 and 1993. In developing their estimate Filmer and Pritchett had to overcome a methodological difficulty: The NFHS, modeled closely on the Demographic and Health Surveys, measures neither household income nor consumption expenditures. As a proxy for long-run household wealth, they constructed a linear asset index from a set of asset indicators, using principal components analysis to derive the weights.

This asset index is robust, produces internally coherent results, and provides a close correspondence with data on state domestic product and on state level poverty rates. They validate the asset index using data on consumption spending and asset ownership from Indonesia, Nepal, and Pakistan. The asset index has reasonable coherence with current consumption expenditures and, more importantly, works as well as - or better than - traditional expenditure-based measures in predicting enrollment status. The authors find that on average a child from a wealthy household (in the top 20 percent on the asset index developed for this analysis) is 31 percent more likely to be enrolled in school than a child from a poor household (in the bottom 40 percent).

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to inform educational policy. The study was funded by the Bank`s Research Support Budget under the research project Educational Enrollment and Dropout (RPO 682-11).

Abstract:
Typically only a small proportion of the population is chronically poor; many more are not always poor but are vulnerable to episodes or seasons of poverty and would be interested in programs that reduce the risks they face.

Vulnerability is an important aspect of households' experience of poverty. Many households, while not currently in poverty, recognize that they are vulnerable to events - a bad harvest, a lost job, an illness, an unexpected expense, an economic downturn - that could easily push them into poverty.

Most operational measures define poverty as some function of the shortfall of current income or consumption expenditures from a poverty line, and hence measure poverty only at a single point in time.

Pritchett, Suryahadi, and Sumarto propose a simple expansion of those measures to quantify vulnerability to poverty. They define vulnerability as a probability, the risk that a household will experience at least one episode of poverty in the near future. A household is defined as vulnerable if it has 50-50 odds or worse of falling into poverty.

Using those definitions, they calculate the vulnerability to poverty line (VPL) as the level of expenditures below which a household is vulnerable to poverty. The VPL allows the calculation of a headcount vulnerability rate (the proportion of households vulnerable to poverty), a direct analogue of the headcount poverty rate.

The authors implement this approach using two sets of panel data from Indonesia. First they show that if the poverty line is set so that the headcount poverty rate is 20 percent, the proportion of households vulnerable to poverty is roughly 30-50 percent. In addition to the 20 percent currently poor, an additional 10-30 percent of the population is at substantial risk of poverty.

They illustrate the usefulness of this approach for targeting by examining differences in vulnerability between households by gender, level of education, urban-rural residence, land-holding status, and sector of occupation of the head of household.

This paper - a product of the Environment and Social Development Sector Unit, East Asia and Pacific Region - is part of a larger effort in the region to develop a national poverty reduction strategy for Indonesia. Lant Pritchett may be contacted at lant_pritchett@harvard.edu.

Abstract:
Matching a measure of social capital with data on household income in certain rural villages in Tanzania shows that social capital is indeed both capital (in that it raises incomes) and social (in that household incomes depend on village, not just household, social capital).

Narayan and Pritchett construct a measure of social capital in rural Tanzania, using data from the Tanzania Social Capital and Poverty Survey (SCPS), a large-scale survey that asked individuals about the extent and characteristics of their associational activity and their trust in various institutions and individuals.

They match this measure of social capital with data on household income in the same villages (both from the SCPS and from an earlier household survey, the Human Resources Development Survey). In doing so, they show that social capital is indeed both capital (in that it raises incomes) and social (in that household incomes depend on village, not just household, social capital).

The magnitude of social capital's effect on incomes is impressive: a one standard deviation increase in village social capital increases a household proxy for income by at least 20 to 30 percent.

This is as great an impact as an equivalent increase in nonfarming assets, or a tripling of the level of education.

Data from the two surveys make it possible to identify some of the proximate channels through which social capital affects incomes: better publicly provided services, more community activity, greater use of modern agricultural inputs, and greater use of credit in agriculture.

This paper - a joint product of Social Development, and Poverty and Human Resources, Development Research Group - is part of a larger effort in the Bank to understand the social determinants of sustainable development.

Abstract:
Roughly 95 percent of cross-national variation in child or infant mortality can be explained by a country's per capita income, the distribution of income, the extent of women's education, the level of ethnic fragmentation, and the predominant religion. Public spending on health has relatively little impact.

Filmer and Pritchett use cross-national data to examine the impact on child (under 5) and infant mortality of both nonhealth (economic, cultural, and educational) factors and public spending on health. They come up with two striking findings:
° Roughly 95 percent of cross-national variation in mortality can be explained by a country's per capita income, the distribution of income, the extent of women's education, the level of ethnic fragmentation, and the predominant religion.
° Public spending on health has relatively little impact, with a coefficient that is numerically small and statistically insignificant at conventional levels. Independent variations in public spending explain less than one-tenth of 1 percent of the observed differences in mortality across countries.

The estimates imply that for a developing country at average income levels, actual public spending per child death averted is $50,000 to $100,000. This contrasts markedly with a typical range of estimates for the cost-effectiveness of medical interventions to avert the main causes
of child mortality of $10 to $4,000.

They outline three possible explanations for this divergence between the actual and apparent potential of public spending: the allocation of public spending, the net impact of additional public supply, and public
sector efficacy.

This paper - a product of the Development Research Group - is part of a larger effort in the group to investigate the impact of health sector policies. The study was funded by the Bank's Research Support Budget under the research Project Primary Health Care: A Critical Evaluation (RPO 680-29). Deon Filmer may be contacted at dfilmer@worldbank.org.

Abstract:
There is an apparent consensus that the correct health policy in developing countries is public provision of a mix of preventive and simple curative services through low level health workers and facilities. But the strength of this consensus on the primary health care paradigm is in sharp contrast to either the strength of its analytical foundations or its mixed record in practice.

Filmer, Hammer, and Pritchett show how the recent empirical and theoretical literature on health policy sheds light on the disappointing experience with the implementation of primary health care. They emphasize the evidence on two weak links between government spending on health and improvements in health status. First, the capability of developing country governments to provide effective services varies widely-so health spending, even on the right services, may lead to little actual provision of services. Second, the net impact of government provision of health services depends on the severity of market failures. Evidence suggests these are the least severe for relatively inexpensive curative services, which often absorb the bulk of primary health care budgets. Government policy in health can more usefully focus directly on mitigating market failures in traditional public health activities and, in more developed settings, failures in the markets for risk mitigation. Addressing poverty requires consideration of a much broader set of policies which may-or may not-include provision of health services.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to investigate efficacy in the social sectors. The study was funded by the Bank's Research Support Budget under the research project Primary Health Care: A Critical Examination (RPO 680-29). The authors may be contacted at dfilmer@worldbank.org or jhammer@worldbank.org.

Abstract:
There is a strong statistical link between a country's civil liberties and the performance of its aid-financed govern-ment investment projects. But type of political regime (whether authoritarian or democratic) and the status of more purely political liberties do not appear to significantly affect project performance.

Using data from the World Bank's Operations Evaluation Department, Isham, Kaufmann, and Pritchett examine the link between the performance of Bank-financed projects and various indicators of country governance. They find that:
° There is a strong statistical, and possibly causal, link between civil liberties and project performance. After controlling for a variety of determinants of project performance, they find that in countries with the best civil liberties records projects have an economic rate of return between 8 and 22 percentage points higher than the rate of return in countries with the worst civil liberties. (The average rate of return in the sample is 16 percent.)
° The type of political regime (whether authoritarian or democratic) and the status of more purely political liberties do not appear to significantly affect project performance.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to understand the donor and country determinants of aid effectiveness. The study was funded by the Bank's Research Support Budget under the research project Bank Project Effectiveness and Country Policy Environment (RPO 679-49).

Abstract:
The misallocation of public sector educational spending across inputs that leads to underspending on productive inputs like books, instructional materials, and facilities is due to political forces- thus requires political solutions.

The accumulated results of empirical studies show that the public sector typically chooses spending on inputs such that the productivity of additional spending on books and instructional materials is 10 to 100 times larger than that of additional spending on teacher inputs (for example, higher wages, smaller class size). Pritchett and Filmer argue that this pervasive and systemic deviation of actual spending from the technical optimum requires a political, not economic or technical, explanation. The evidence is consistent only with a class of positive models in which public spending choices are directly influenced by a desire for higher spending on teacher inputs, over and above their role in producing educational outputs. This desire could be due either to teacher power, or bureaucratic budget-maximizing behavior, or political patronage. Pritchett and Filmer conclude by exploring the implications of these positive political models of educational spending behavior for various types of proposed educational reforms (localized control, parental participation, vouchers, and so on) which requires an examination of how the proposed reforms shift the relative powers of the stakeholders in the educational system: students and parents, educators, bureaucrats, and politicians.

This paper-a product of the Poverty and Human Resources, Development Research Group-is part of a larger effort in the department to understand and improve the efficacy of social service provision. The study was funded in part by the Research Support Budget under the research project Rationale for Education Reform (RPO 681-12). Deon Filmer may be contacted at dfilmer@worldbank.org.

Abstract:
The relative price of food increased considerably during Indonesia's recent economic crisis, so the explicit (or implicit) choice of the weight given to the inflation rate for food prices dramatically affects calculations of the poverty rate.

Poverty is intrinsically a complex social construct, and even when it is narrowly defined by a deficit of consumption spending, many thorny issues arise in setting an appropriate poverty line.

Suryahadi, Sumarto, Suharso, and Pritchett limit themselves to examining how poverty - defined on a consistent, welfare-comparable basis - changed in Indonesia during a series of crises that began in August 1997. Using various data sets and studies, they develop a consistent series on poverty's evolution from February 1996 to August 1999.

Specifically, they study the appropriate method for comparing changes in poverty between the February 1996 and February 1999 Susenas surveys.

To set a poverty line for 1999 that is conceptually comparable to that for 1996 involves a standard issue of price deflation: How much would it cost in 1999 to purchase a bundle of goods that would produce the same level of material welfare as the money spent at the poverty line in 1996?
Empirically, given major changes in the relative prices of food, the key issue is the weight given food prices in the price index.

Using different deflators produces a range of plausible estimates, but they produce two base cases: one working forward from 1996 and one working backward from 1999.

If one accepts the official figure of 11.34 percent for February 1996, poverty increased from the immediate pre-crisis rate of about 7-8 percent in the second half of 1997 to the post-crisis rate of about 18-20 percent by September 1998 and 18.9 percent in February 1999.

If one begins from the best estimate of the poverty rate in February 1999 (27.1 percent), poverty rose by 9.6 percentage points from 17.5 percent in February 1996.

Since February 1999, poverty appears to have subsided considerably but - two years after the crisis started - is still substantially higher than it was immediately before the crisis.

This paper - a product of the Environment and Social Development Sector Unit, East Asia and Pacific Region - is part of a larger effort in the region to develop a national poverty strategy for Indonesia. Lant Pritchett may be contacted at lant_pritchett@harvard.edu.

Abstract:
The welfare of the poor turns in large measure not only on technocratic development "policies", but the effective delivery of key public services, core elements of which require thousands of face-to-face discretionary transactions ("practices") by service providers. The importance of (often idiosyncratic) "practices" was largely ignored in the 1960s and 70s, however, as planners in developing countries sought to rapidly emulate the service delivery mechanisms of the developed countries, namely standardized (top-down) "programs"managed by a centralized civil service bureaucracy. Although this approach could claim some notable successes in poor countries, it soon became readily apparent that it had failed early and often in virtually all sectors. Three common civil service reforms in the 1980s also yielded disappointing results, so in the 1990s scholars and practitioners began to tout more radical "participatory" (or bottomup) proposals for improving service delivery. These new proposals have generated a series of unusual alliances and antagonisms in contemporary development debates. We attempt to unravel these debates by distinguishing between the original solution and eight current proposals for improving service delivery, on the basis of a principal-agent model of incentives that explores how these various proposals change flows of resources, information, decision-making, delivery mechanisms, and accountability. We briefly assess the arguments made by proponents and detractors of each approach, and suggest some of the implications of this framework for education, research, and those charged with improving service delivery.

economic development, service delivery, principal-agent

Abstract:
While household wealth is strongly related to educational attainment of children nearly everywhere, the magnitude and pattern of the effect of wealth differs widely. The gap in attainment of children of the poor and rich ranges from only one or two years in some countries to nine or ten years in others. This attainment gap is the result of different patterns of enrollment and dropout: While in South America low attainment among the poor is almost entirely due to children who enroll then drop out early, in West Africa and South Asia many poor children never enroll.

Using household survey data from 44 Demographic and Health Surveys in 35 countries, Filmer and Pritchett document different patterns in the enrollment and attainment of children from rich and poor households. They find that:

Enrollment profiles of the poor differ across countries but fall into distinctive regional patterns. In some areas (including much of South America) the poor reach nearly universal enrollment in first grade but then drop out in droves. In others (including much of South Asia and West Africa), the poor never enroll. Both patterns lead to low attainment.

There are enormous differences across countries in the wealth gap - the difference in enrollment and educational attainment between the rich and the poor. In some countries the difference between the rich and poor in the median number of years of school completed is only a year or two; in others the gap is as great as nine or ten years.

The attainment profiles can be used as diagnostic tools to examine issues in the educational system, including the extent to which enrollment is low because of the physical unavailability of schools.

Filmer and Pritchett overcome the lack of data on income and consumption expenditures in the surveys by constructing a proxy for long-run household wealth, using survey information on assets and using the statistical technique of principal components.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to inform education policy. The study was funded by the Bank`s Research Support Budget under the research project Educational Enrollment and Dropout (RPO 682-11).

Abstract:
The recent growth literature has underestimated the importance - and ignored the implications - of the instability and volatility of growth rates. In particular, the use of panel data to investigate the effects of long-term growth in developing countries - especially with fixed effects estimates - is potentially more problematic than helpful.

Except during the Great Depression, the historical path for per capita GDP in the United States has been reasonably stable exponential trend growth, with modest cyclical deviation. Graphically, growth in the United States displays as a modestly sloping, only slightly bumpy, hill. But almost nothing that is true about per capita GDP for the United States (or for other OECD countries) is true for developing countries.

First, per capita GDP in most developing countries does not follow a single time trend: For a given country, there is great instability in growth rates over time, relative to both average level of growth and to cross-sectional variance.

These shifts in growth rates lead to distinct patterns. Some countries have had steady growth (hills and steep hills); others have had rapid growth followed by stagnation (plateaus); others have had rapid growth followed by declines (mountains) or even catastrophic declines (cliffs); still others have experienced continuous stagnation (plains) or even steady decline (valleys).

Second, volatility - however measured - is much greater in developing than in industrial countries.

These stylized observations about growth rates, Pritchett concludes, suggest that it may be useless to use panel data to investigate long-term growth rates in developing countries. Perhaps more can be learned about developing countries by investigating what initiates (or halts) episodes of growth.

There is something of a professional split in growth literature, Pritchett observes. Macroeconomists studying industrial countries discuss steady-state growth and ponder whether all countries in the convergence club will reach the same happy level in the end. Development economists, on the other hand, are the pathologists of economics, having discovered that developing countries are most emphatically not all alike. Developing countries have found ways to be ecstatic but they have also discovered many different ways to be unhappy.

This paper - a product of the Development Research Group - is part of a larger effort in the group to understand the determinants of economic growth.

Abstract:
As part the Local Level Institutions study of local life in villages in rural Indonesia information was gathered on sampled household's participation in social activities. We classified the reported activities into four distinct types of social activity: sociability, networks, social organizations, and village government organizations. Respondents were also asked about questions about their village government: whether they were informed about village funds and projects, if they participated in village decisions, if they expressed voice about village problems, and if they thought the village government was responsive to local problems. Several findings emerge regarding the relationship between the social variables and the governance activities. Not surprisingly, an individual household's involvement with the village government organizations tends to increase their own reports of positive voice, participation, and information. In contrast, the data suggest a negative spillover on other households. There is a strong "chilling" effect of one household's participation in village government organizations on the voice, participation, and information of other households in the same village. The net effect of engagement in village government organizations is generally negative, while the net effect of membership in social organizations is more often associated with good governance outcomes. These findings indicate that existing social organizations have a potentially important role to play in enhancing the performance of government institutions in Indonesia and in the evolution of good governance more generally.

This paper - a product of the Environment and Social Development Sector Unit, East Asia and Pacific Region - is part of a larger effort in the region to study local level institutions.

Abstract:
A dollar's worth of public investment spending often does not create a dollar's worth of capital, especially in developing countries. One deep difficulty of development may be that even when public capital is productive it may be difficult to create this capital in the public sector.

Pritchett presents theory and calculations to show that part of the explanation of slow growth in many poor countries is not that governments did not spend on investments, but that these investments did not create productive capital. For a variety of reasons, governments take resources from current consumption to invest in the economic equivalent of pyramids, items that produce no future output.

The most critical assumption (of the many) necessary for cumulated investment flows to be even reasonable proxies for capital stocks is that the cost of investment (the p's) is equal to the value of the capital stock evaluated as its increment to future profitability (the q's). This assumption can be justified only if investors act to equalize these - and under many conditions, profit-maximizing investors will do so. But there is ample reason not to believe that all governments act as profit-maximizing investors - and ample reason to believe that some governments invest better than others.

The implication, especially in developing countries, is that a dollar's worth of public investment spending often does not create a dollar's worth of public capital. A variety of calculations suggest that in a typical developing country less than 50 cents of capital were created for each public dollar invested. One of the deep difficulties of development may well be that even when public capital is productive it may be difficult to create this capital in the public sector.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to investigate the impact of policies on long run economic growth.

Abstract:
New insights - from new data - on the relationship between population growth, factor accumulation, and productivity.

In research on how population growth affects economic performance, some researchers stress that population growth reduces the natural resources and capital (physical and human) per worker while other researchers stress how greater population size and density affect productivity. Despite these differing theoretical predictions, the empirical literature has focused mainly on the relationship between population growth and output per person (or crude proxies for factor accumulation). It has not decomposed the effect of population through factor accumulation and the effect through productivity.

Pritchett uses newly created cross-country, time-series data on physical capital stocks and the educational stock of the labor force to establish six findings:

There is no correlation between the growth of capital per worker and population growth.

The common practice of using investment rates as a proxy for capital stock growth rates is completely unjustified, as the two are uncorrelated across countries.

There is either no correlation, or a weak positive correlation, between the growth of years of schooling per worker and the population growth rate.

Enrollment rates are even worse as a crude proxy for the expansion of the educational capital stock, as the two are negatively correlated.

There is no correlation, or a weak negative correlation, between measures of total factor productivity growth and population growth.

Nearly all of the weak correlation between the growth of output per person and population growth is the result of shifts in participation in the labor force, not of changes in output per worker.

This paper is a product of the Poverty and Human Resources Division, Policy Research Department.

Abstract:
The Millennium Development Goal for primary schooling completion has focused attention on a measurable output indicator to monitor increases in schooling in poor countries. The authors argue the next step - which moves towards the even more important Millennium Learning Goal - is to monitor outcomes of learning achievement. We demonstrate that even in countries meeting the MDG of primary completion, the majority of youth are not reaching even minimal competency levels, let alone the competencies demanded in a globalized environment. Even though Brazil is on track to the meet the MDG, our estimates are that 78 percent of Brazilian youth lack even minimally adequate competencies in mathematics and 96 percent do not reach what we posit as a reasonable global standard of adequacy. Mexico has reached the MDG - but 50 percent of youth are not minimally competent in math and 91 percent do not reach a global standard. While nearly all countries' education systems are expanding quantitatively nearly all are failing in their fundamental purpose. Policymakers, educators and citizens need to focus on the real target of schooling: adequately equipping their nation's youth for full participation as adults in economic, political and social roles. A goal of school completion alone is an increasingly inadequate guide for action. With a Millennium Learning Goal, progress of the education system will be judged on the outcomes of the system: the assessed mastery of the desired competencies of an entire age cohort - both those in school and out of school. By focusing on the learning achievement of all children in a cohort an MLG eliminates the false dichotomy between access/enrollment and quality of those in school: reaching an MLG depends on both.

primary school, poverty, millenium development goals, school completion, school enrollment

Abstract:
This article uses a cross-national data set on the performance of government investment projects financed by the World Bank to examine the link between government efficacy and governance. It demonstrates a strong empirical link between civil liberties and the performance of government projects. Even after controlling for other determinants of performance, countries with the strongest civil liberties have projects with an economic rate of return 8-22 percentage points higher than countries with the weakest civil liberties. The strong effect of civil liberties holds true even when controlling for the level of democracy. The interrelationship among civil liberties, civil strife, and project performance suggests that the possible mechanism of causation is from more civil liberties to increased citizen voice to better projects. This result adds to the evidence for the view that increasing citizen voice and public accountability - through both participation and better governance - can lead to greater efficacy in government action.

Abstract:
India is an emerging global superpower as its rapid growth has transformed its economy and has maintained itself as the world's largest democracy. But at the same time India lags in many dimensions—its malnutrition rate is one of the highest in the world, its immunization rates are lower than most African countries, and Bangladesh has a better infant mortality rate. I argue that this is in part because the India state is "flailing" - its very capable head is not longer reliably connected to the arms and legs of implementation. In the four-fold transition of economy, polity, administration, and society the administrative capability of the state is lagging. I use examples from services like health, education, and routine transactions like issuing driver's licenses to show that the agents of the state routinely do not implement the tasks they are assigned - causing a massive divergence between de jure and de facto reality. The paper concludes with speculations about the causes of flailing and possible future trajectories.

Microeconomics, International Development, India

Abstract:
Much of the new growth literature stresses country characteristics, such as education levels or political stability, as the dominant determinant of growth. However, growth rates are highly unstable over time, with a correlation across decades of .1 to .3, while country characteristics are stable, with cross-decade correlations of .6 to .9. Shocks, especially those to terms of trade, play a large role in explaining variance in growth. These findings suggest either that shocks are important relative to country characteristics in determining long-run growth, or that worldwide technological change determines long-run growth while country characteristics determine relative income levels.

Abstract:
A study of two programs compares the safety net (which guarantees against a fall past an absolute level) with the safety rope (which guarantees against a fall of more than a given distance).

Imagine several mountain climbers, scaling a cliff face, who want protection from falling. One way to protect them would be to place a net at the bottom of the cliff to catch any climber just before he hits the ground. Another would be to provide a rope and a set of movable devices that can be attached to the cliff; as the climbers scale the cliff, they attach the rope at higher and higher levels so that if a climber falls, he falls only by the length of the rope.

In this paper, the safety net guarantees against a fall past an absolute level; the safety rope guarantees against a fall of more than a given distance. The safety net is concerned with an increase in poverty; the safety rope mitigates risk through social insurance or social protection.

Calculations of the benefit incidence and targeting effectiveness of safety net programs typically examine only the relationship between a household`s current expenditures and program participation. But in programs that respond to an economic shock or intend to mitigate household risk, it is not only the current level of expenditures that matters but also changes in expenditures.

Safety net programs may intend to benefit only the currently poor; programs to mitigate shocks (safety rope programs) may intend to provide transfers to those whose incomes have fallen, even if they have not fallen below an absolute poverty threshold.

Sumarto, Suryahadi, and Pritchett examine the targeting performance of two programs created to respond to the social impacts of Indonesia's crisis.

They find strong evidence that one program, subsidized sales of rice targeted to the permanently poor, was only weakly related to the shock in consumption spending.

A job creation program was much more responsive to changes in spending.

A household that started in the third quintile in expenditures in 1997 and fell to the lowest quintile between 1997 and 1998 was four times as likely to have participated in the job creation program as a household starting in the third quintile in 1997 but experiencing a positive shock. But the household experiencing a negative shock was only 50 percent more likely to have received subsidized rice than a household experiencing a positive shock.

This paper - a product of the Environment and Social Development Sector Unit, East Asia and Pacific Region - is part of a larger effort in the region to improve the efficacy of response to the social impacts of the Indonesian crisis. Lant Pritchett may be contacted at lant_pritchett@harvard.edu.

Abstract:
It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. We create a first estimate a new statistic: income per natural - the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50% higher than GDP per resident. For 1.1 billion people the difference exceeds 10%. We also show that poverty estimates are very different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural. This means that departing one's country of birth is today one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.

economic development, migration

Abstract:
We estimate the "place premium"-the wage gain that accrues to foreign workers who arrive to work in the United States. First, we estimate the predicted, purchasing-power adjusted wages of people inside and outside the United States who are otherwise observably identical-with the same country of birth, country of education, years of education, work experience, sex, and rural or urban residence. We use new and uniquely rich micro-data on the wages and characteristics of over two million individual formal-sector wage-earners in 43 countries (including the US). Second, we examine the extent to which these wage ratios for observably equivalent workers may overstate the gains to a marginal mover because movers may be positively selected on unobservable productivity in their home country. New evidence for nine of the countries, combined with a range of existing evidence, suggests that this overstatement can be significant, but is typically modest in magnitude. Third, we estimate the degree to which policy barriers to labor movement in and of themselves sustain the place premium, by bounding the premium observed under self-selected migration alone. Finally, we show that the policy-induced portion of the place premium in wages represents one of the largest remaining price distortions in any global market; is much larger than wage discrimination in spatially integrated markets; and makes labor mobility capable of reducing households' poverty at the margin by much more than any known in situ intervention.

Labor, Immigration, International Economics, Microeconomics, International Affairs, Globalization, International Development

Abstract:
Poverty reduction is now, and quite properly should remain, the primary objective of the World Bank. But, when the World Bank dreams of a world free of poverty-what should it be dreaming? I argue in this essay that the dream should be a bold one, that treats citizens of all nations equally in defining poverty, and that sets a high standard for what eliminating poverty will mean for human well-being.

I purpose a new standard for global income poverty for the World Bank's use. This poverty line is the weighted average of the poverty lines declared by its shareholders, where the declared poverty line is no lower than the country uses for its own citizens. I show this will imply a poverty line of around U.S.$15 a day in current purchasing power adjusted currency units¿about ten times higher than the existing standard.

poverty reduction, poverty line, World Bank

Abstract:
Using the word capital to represent two different concepts is not such a problem when government is responsible for only a small fraction of national investment and is reasonably effective (as in the United States). But when government is a major investor and is ineffective, the gap between capital and cumulative, depreciated investment effort (CUDIE) may be enormous. A public sector steel mill may absorb billions as an investment, but if it cannot produce steel it has zero value as capital.

The cost of public investment is not the value of public capital. Unlike for private investors, there is no remotely plausible behavioral model of the government as investor that suggests that every dollar the public sector spends as investment creates capital in an economic sense. This seemingly obvious point has so far been uniformly ignored in the voluminous empirical literature on economic growth, which uses, at best, cumulated, depreciated investment effort (CUDIE) to estimate capital stocks.

But in developing countries especially, the difference between investment cumulated at cost and capital value is of primary empirical importance: government investment is half or more of total investment. And perhaps as much as half or more of government investment spending has not created equivalent capital. This suggests that nearly everything empirical written in three broad areas is misguided.

First, none of the estimates of the impact of public spending identify the productivity of public capital. Even where public capital could be very productive, regressions and evaluations may suggest that public investment spending has little impact.

Second, everything currently said about total factor productivity in developing countries is deeply suspect, as there is no way empirically to distinguish between low output (or growth) attributable to investments that created no factors and low output (or growth) attributable to low (or slow growth in) productivity in using accumulated factors.

Third, multivariate growth regressions to date have not, in fact, controlled for the growth of capital stock, so spurious interpretations have emerged.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand the importance of public sector actions for economic growth.

Abstract:
This paper is part of the Copenhagen Consensus process, which aims to assess and evaluate the opportunities available to address the ten largest challenges facing the world. One of these ten challenges is the "lack of education." This paper will define "lack of education," in terms of enrollments, attainments and learning achievement. It provides an analytical framework to evaluate the various options that can be used to address this issue.

Education can be described as equipping people with the range of competencies necessary to lead productive, fulfilling lives fully integrated into their societies and communities. Many of the international goals are framed exclusively around enrollment, which is merely a means towards creating competencies and learning achievement. This paper discusses the scope and options for improving people's competencies, and describes the conditions for effective policy action.

international education, international development

Abstract:
The authors explore the hypothesis that - because of the important role children play in collection activities (firewood, water, grazing) - the demand for children may increase as local environmental resources are depleted, setting up a vicious circle between resource depletion and population growth. Using a large-scale household data set from Pakistan, with detailed information on fertility and the allocation of time to collection activities, they find that: (i) collection activities absorb a substantial part of household resources - firewood collection accounts for 6.2 percent of household expenditures, valued in collection time; (ii) collection absorbs a quarter of the time of children; (iii) women benefit when there are older children in the household; they work 2.6 hours a week less in household activities for each child aged 10 to 15, and 3.2 hours less for each child over 15; and (iv) there seems to be an inverse relationship between fertility and the availability of firewood; even after controlling for other determinants of fertility in reduced form regressions, the authors show that households that live some distance from firewood have more children, whereas households that live where firewood is more expensive have fewer children.

Abstract:
This paper compares the wages of workers inside the United States to the wages of observably identical workers outside the United States-controlling for country of birth, country of education, years of education, work experience, sex, and rural-urban residence. This is made possible by new and uniquely rich microdata on the wages of over two million individual formal-sector wage-earners in 43 countries. The paper then uses five independent methods to correct these estimates for unobserved differences and introduces a selection model to estimate how migrants'wage gains depend on their position in the distribution of unobserved wage determinants. Following all adjustments for selectivity and compensating differentials, the authors estimate that the wages of a Bolivian worker of equal intrinsic productivity, willing to move, would be higher by a factor of 2.7 solely by working in the United States. While this is the median, this ratio is as high as 8.4 (for Nigeria). The paper documents that (1) for many countries, the wage gaps caused by barriers to movement across international borders are among the largest known forms of wage discrimination; (2) these gaps represent one of the largest remaining price distortions in any global market; and (3) these gaps imply that simply allowing labor mobility can reduce a given household's poverty to a much greater degree than most known in situ antipoverty interventions.

Population Policies, Income, Economic Theory & Research, Labor Markets

Abstract:
In an earlier article, the authors outline some reasons for the disappointingly small effects of primary health care programs and identified two weak links standing between spending and increased health care. The first was the inability to translate public expenditure on health care into real services due to inherent difficulties of monitoring and controlling the behavior of public employees. The second was the crowding out of private markets for health care, markets that exist predominantly at the primary health care level.

This article presents an approach to public policy in health that comes directly from the literature on public economics. It identifies two characteristic market failures in health. The first is the existence of large externalities in the control of many infectious diseases that are mostly addressed by standard public health interventions. The second is the widespread breakdown of insurance markets that leave people exposed to catastrophic financial losses. Other essential considerations in setting priorities in health are the degree to which policies address poverty and inequality and the practicality of implementing policies given limited administrative capacities. Priorities based on these criteria tend to differ substantially from those commonly prescribed by the international community.

Abstract:
Ghost towns dot the West of the United States. These cities boomed for a period and then, for various reasons, fell into a process of decline and have shrunk to a small fraction of their former population. Are there ghost countries - countries that, if there were population mobility, would only have a very small fraction of their current population? This paper carries out four empirical illustrations of the potential magnitude of the ghost country problem by showing that the desired population of any given geographic region varies substantially. First, the variance of growth rates of populations due to mobility across regions of the same country is often twice large as the variance across all developing countries in the world. While the variance of per capita output or income growth is much smaller. The ratio of the variance of the growth of population to the variance of the growth of output per head across regions within countries is 4 to 14 times as large as the same ratio across developing countries. Second, using county level data I construct ghost regions of the United States - contiguous collections of counties that are the size of many countries and have only a third the population they would have had without out-migration. Third, I compare the historical evolution of labor force and real wages of Ireland in the nineteenth century to the response of labor force and wages (or output per head) to negative shocks when labor mobility is restricted. Fourth, I calculate the changes in the labor force that would restore GDP per capita to its previous peak. All of these calculations suggest that even with thorough going globalization - the free mobility of goods and capital - and complete policy reform - common economic institutions and policies - there will remain substantial pressures for labor mobility. This also implies there will be both boom towns and ghost countries.

economic growth, population mobility

Abstract:
When the World Bank dreams of "a world free of poverty," what should it be dreaming? In measuring global income or consumption expenditure poverty, the World Bank has widely adopted the $1 a day standard as a lower bound. Because this standard is based on poverty lines in the poorest countries, anyone with income or expenditures below this line will truly be poor. But there is no consensus standard for the upper bound of the global poverty line: above what level of income or expenditures is someone truly not poor? This article proposes that the World Bank compute its lower and upper bounds in a methodologically equivalent way, using the poverty lines of the poorest countries for the lower bound and the poverty lines of the richest countries for the upper bound. The resulting upper bound global poverty line would be 10 times higher than the current lower bound and at least 5 times higher than the currently used alternative lower bound of $2 a day. And in tracking progress toward a world free of poverty, the World Bank should compute measures of global poverty using a variety of weights on the depth and intensity of poverty for a range of poverty lines between the global lower and upper bounds. For instance, rather than trying to artificially force the global population of 6.2 billion (a billion is 1,000 million) into just two categories "poor" and "not poor," with the new range of poverty lines the estimates would be that 1.3 billion people are "destitute" (below $1 a day), another 1.6 billion are in "extreme poverty" (above $1 a day but below $2 dollar a day), and another 2.5 billion are in "global poverty" (above extreme poverty but below the upper bound poverty line).

Abstract:
Does the government control of school systems facilitate equality in school quality? There is a trade-off. On the one hand, government direct control of schools, typically through a large scale hierarchical organization, could produce equalization across schools by providing uniformity in inputs, standards, and teacher qualifications that localized individually managed schools could not achieve. But there is a tendency for large scale formal bureaucracies to “see” less and less of localized reality and hence to manage on the basis of a few simple, objective, and easily administratively verified characteristics (e.g. resources per student, formal teacher qualifications). Whether centralized or localized control produces more equality depends therefore not only on what “could” happen in principle but what does happen in practice. When government implementation capacity is weak, centralized control could lead to only the illusion of equality: In which central control of education with weak internal or external accountability actually allows for much greater inequalities across schools than entirely “uncontrolled” local schools. Data from Pakistan, using results from the LEAPS study, and from two states of India show much larger variance in school quality (adjusted for student characteristics) among the government schools — because of very poor public schools which continue in operation. We use the PISA data to estimate school specific learning achievement (in mathematics, science, and reading) net of individual student and school average background characteristics and compare public and private schools for 34 countries. For these countries there is, on average, exactly the same inequality in adjusted learning achievement across the private schools as across the public schools. But while inequality is the same on average, in some countries, such as Denmark, there was much more equality within the public sector while in others, such as Mexico, there was much more inequality among the public schools. Among the 18 non-OECD participating PISA countries the standard deviation across schools in adjusted quality was, on average, 36 percent higher in government than in private schools. In cases with weak states the proximate cause of high inequality again was that the public sector distribution of performance had a long left tail — schools with extremely poor performance. Relying on blinded weak states for top-down control of educational systems can be lose-lose relative to localized systems relying on bottom-up control — producing worse average performance and higher inequality.

education, inequality, bureaucracy, centralized, localized

Abstract:
A standard method for calculation poverty lines (e.g. Ravallion, 1994) is not fully specified. The choice of the "reference population" for determining food baskets is left to the decision of the individual analyst. However, the poverty line can be quite sensitive to the real income of the reference group because the "quality" of the food basket - measured as the food expenditures per calorie - rises sharply with income. We propose that the reference group be centered on the poverty line. To address the obvious circularity problem in choosing a reference population at the poverty line to define the poverty line, we use an iterative approach. This iterative method provides a methodological anchor that fixes the reference group.