Shantayanan Devarajan

• Professor at Georgetown University

For developing countries, decentralising power from central government to local authorities holds the promise of deepening democracy, empowering citizens, improving public services and boosting economic growth. But the evidence on when and how decentralisation can bring these benefits has been mixed. Under the wrong conditions, decentralised power...

Noting that a major purpose of multilateral institutions is to deliver international public goods, this paper applies the theory and practice of public economics, as well as papers in this section, to the potential and challenges facing these institutions. First, I show that deviations from the standard model of fiscal decentralization are reflecte...

Slow growth in manufactured and agricultural exports has been attributed to the high share of natural resources in many African economies. Not only does the resource sector draw labour and capital away from other sectors, but also the spending of resource revenues in the domestic economy bids up the price of non-tradable goods, making the tradable...

Since 2014, almost all African countries have experienced an increase in public debt and a change in its nature. The ratio of public debt to GDP has doubled, and sovereign debt is changing from concessional credit provided by official agencies to market-based loans from private institutions. This paper attempts to answer three questions that are be...

On June 1, 2017, President Trump announced the United States' withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environment...

Oil-rich countries systematically misallocate public expenditures relative to non-oil countries—by favoring consumption over capital, and within consumption, inefficient subsidies and public sector wages over targeted transfers. Furthermore, for given levels of expenditure, value for money is considerably less in oil-rich countries. This chapter ar...

If trade tensions between the United States and certain trading partners escalate into a full-blown trade war, what should developing countries do? Using a global, general equilibrium model, this paper first simulates the effects of an increase in U.S. tariffs on imports from all regions to about 30 percent (the average non-Most Favored Nation tari...

Despite a large body of evidence on the policies and institutions needed to generate growth and reduce poverty, many governments fail to adopt these policies or establish the institutions. Research advances since the 1990s have explained this syndrome, which this paper generically calls “government failure”, in terms of the incentives facing politi...

During the 2000s, expenditure inequality in Arab countries was low or moderate and, in many cases, declining. Different measures of wealth inequality were also lower than elsewhere. Yet, there were revolutions in four countries and protests in several others. We explain this so-called “inequality puzzle” by first noting that, despite favorable inco...

This paper uses a global general equilibrium simulation model to quantify the effects of lifting economic sanctions on Iran with and without strategic responses. Iran benefits the most, with average per capita welfare gains ranging from close to 3 percent, in the case when Iran’s crude oil exports to the European Union recover to half their pre-emb...

Inequality is often mentioned as a factor contributing to the recent and ongoing regional changes in the Arab countries. This paper briefly highlights what is known about measured inequality in the region. The focus of the paper is on inequality measures that are based on national household consumption and income surveys, while the final section br...

This paper develops a dynamic, stochastic, general-equilibrium model to analyze and derive simple budget rules in the face of volatile public revenue from natural resources in a low-income country like Niger. The simulation results suggest three policy lessons or rules of thumb. When a resource price change is positive and temporary, the best strat...

After an impressive acceleration in growth and poverty reduction since the mid-1990s, many African countries continue to register robust growth in the aftermath of the global financial crisis. Will this growth persist, given the tepid recovery in developed countries, numerous weather shocks, and civil conflicts in Africa? This paper “stress tests”...

Despite a large body of research and evidence on the policies and institutions needed to generate growth and reduce poverty, many governments fail to adopt these policies or establish the institutions. Research advances since the 1990s have explained this syndrome, which this paper calls ?government failure?, in terms of the incentives facing polit...

This chapter reviews the experience of computable general equilibrium (CGE) models from the perspective of how they have, or have not, influenced public policy in developing countries. The paper describes different classes of empirical models – from small, stylized to large, multisectoral applied models; from static equilibrium models to dynamic, p...

While Africa may have overcome its growth tragedy, it is facing a statistical tragedy, in that the statistical foundations of the recent growth in per-capita GDP and reduction in poverty are quite weak. In many countries, GDP accounts use old methods, population censuses are out of date, and poverty estimates are infrequent and often not comparable...

What precisely has Africa’s record been in improving livelihoods since the growth recovery began in the 2000s? What role does inequality play in this process? And how could even more be made of growth to reduce poverty? These are the questions Luc Christiaensen and Shantayanan Devarajan tackle in their contribution to Current History's latest serie...

Government failures are widespread in Africa. Symptoms include absentee teachers, leakage of public funds, monopolized trucking, and employment-restricting regulations. Can civil society do anything about these failures? Would external donor support to civil society help? We argue that the challenge for civil society is to improve government functi...

Noting that Africa’s resource-rich countries have not translated their wealth into sustained economic growth and poverty reduction, this paper shows that by transferring a portion of resource-related government revenues uniformly and universally as direct payments to the population, some countries could increase both private consumption and the pro...

Le PIB de l’Afrique subsaharienne s’est accru de 5 % par an depuis 2000 et on s’attend à ce qu’il augmente encore plus rapidement dans le futur. Bien que les pessimistes fassent rapidement remarquer que cette croissance a suivi l’augmentation des cours des produits de base, le succès des réformes politiques récentes et l’ouverture croissante des so...

To enhance efficiency of public spending in oil-rich economies, this paper proposes that some of the oil revenues be transferred directly to citizens, and then taxed to finance public expenditures. The argument is that spending that is financed by taxation — rather than by resource revenues accruing directly to the government — is more likely to be...

  The global financial and economic crisis, which hit Africa with a lag, has caused serious setbacks to the continent's growth momentum and likely jeopardized hard-won development gains of recent years. Even though most African countries are likely to avoid recession, the sharp drop in growth rates can have serious, long-term consequences, especial...

Not only do Africa's fragile states grow more slowly than non-fragile states, but they seem to be caught in a "fragility trap". For instance, the probability that a fragile state in 2001 was still fragile in 2009 was 0.95. This paper presents an economic model where three features -- political instability and violence, insecure property rights and...

Using a calibrated general equilibrium model of the South African economy, with 24 types of households identified by ethnic background and income classification, and labor disaggregated into 13 different categories, this paper assesses the impacts of trade reform on household incomes and income distribution. Our general conclusion is that trade ref...

This paper proposes that, to enhance the efficiency of public spending in oil-rich economies, some or all of the oil revenues be transferred to citizens, and then this amount would be taxed to lead to increased citizens' scrutiny over public expenditures. The authors develop the case as follows. First, they confirm the well-known result that public...

This paper identifies the twin problems of higher education financing in Africa—inadequate resources and poor use of existing resources—and traces them to the preponderance of free, public tertiary education in most countries, despite a weak economic rationale for such an approach and unintended consequences of inequitable access and politicization...

This paper examines the potential role of civil society action in increasing state accountability for development in Sub-Saharan Africa. It further develops the analytical framework of the World Development Report 2004 on accountability relationships, to emphasize the underlying political economy drivers of accountability and implications for how c...

Drawing on the existing knowledge of African development from previous publications, Yes Africa Can: Success Stories from a Dynamic Continent takes an in-depth look at 26 economic and social development successes in Sub-Saharan African countries?twenty from individual countries and six that cut across the region. These stories manifest at the proje...

Noting that developing countries may not have the administrative capacity to levy a “pure†carbon tax, we compare the impact of alternative energy taxes with that of a carbon tax in an economy with multiple distortions. We use a disaggregated computable general equilibrium (CGE) model of the South African economy and simulate a range of tax poli...

Africa’s precrisis growth and poverty reduction was the result of increased external resources, a buoyant global economy and—crucially—improved economic policies. Although it is still the world’s poorest region, the prospects for resuming growth are good. Additional resources and further policy reforms could launch the continent on a path of sustai...

This paper proposes that, to increase the efficiency of public spending in oil-rich economies, some or all of the oil revenues be transferred to citizens, and fiscal instruments such as taxation be used to finance public expenditures. The authors develop the case as follows. First, they confirm the well-known result that public-expenditure efficien...

Noting that South Africa may be one of the few African countries that could contribute to mitigating climate change, the authors explore the impact of a carbon tax relative to alternative energy taxes on economic welfare. Using a disaggregate general-equilibrium model of the South African economy, they capture the structural characteristics of the...

This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...

Hollis Burnley Chenery was born in Richmond, Virginia, in 1918. He received his Ph.D. at Harvard University, worked for the Marshall Plan in Europe, taught at Stanford University, served as Assistant Administrator of the US Agency for International Development before joining the World Bank in 1970 for a distinguished, 13-year career there. He retur...

In a risky world should governments provide public goods that reduce risk or compensate the victims of bad outcomes through social insurance? This article examines a basic question in designing social protection policies: how should a government allocate a fixed budget between these two activities? In the presence of income and risk heterogeneities...

This article offers a common framework for addressing Asia's varied human-development challenges by observing that, for the most part, they stem from a systematic failure in the delivery of basic services, especially to poor people, caused by a failure of accountability at different points in the service-delivery chain. It describes various efforts...

Primarily a disease of young adults, aids imposes economic costs that could be devastatingly high in the long run by undermining the transmission of human capital--the main driver of long-run economic growth--across generations. aids makes it harder for victims' children to obtain an education and deprives them of the love, nurturing, and life skil...

Despite obstacles such as conflict, corruption and high fiscal deficits, south Asia has achieved impressive economic growth and poverty reduction in the past decade, thanks mainly to economic reforms in the 1990s. If this growth accelerates to 10 per cent a year, the region could see single-digit poverty rates by 2015. A closer look at the evidence...

Dissatisfied with centralized approaches to delivering local public services, a large number of countries are decentralizing responsibility for these services to lower-level, locally elected governments. The results have been mixed. This chapter provides a framework for evaluating the benefits and costs, in terms of service delivery, of different a...

This paper develops a framework for thinking about the policy challenge of scaling up small scale interventions, governmental and non-governmental, that address poverty reduction successfully. The framework sees scaling up as addressing different components of market failure, government failure and civil society failure. Viewed in this way, constra...

Factors such as weak governance, civil conflict, fiscal deficits and a fixed exchange rate are deemed largely responsible for impeding growth in low income countries. One or more of these factors are present in each of the south Asian countries. Surprisingly, the economies in the region have been showing rapid growth. For each of these apparent sur...

n his book Plagues and Peoples ,M cNeill (1976) views history as the inter- play between an array of parasites and their human hosts—a struggle in which communicable diseases and human responses to them have pro- found social, economic, and cultural effects. Following the outbreak of the AIDS epidemic in the 1980s, humanity must now contend with a...

In a risky world, should governments provide public goods that reduce risk or compensate the victims of bad outcomes? We examine the allocation of public expenditures in the context of a risky environment between the provision of a public good with risk-reducing characteristics, and the expansion of a tax-financed public insurance system. We allow...

This paper builds an analytical and practical framework for using resources more effectively by making services work for poor people. It focuses on services that have the most direct link with human development - education, health, water, sanitation and electricity - and uses examples of service delivery from India, elsewhere in south Asia and the...

Too often, services fail poor people—in access, in quality, and in affordability. But the fact that there are striking examples where basic services such as water, sanitation, health, education, and electricity do work for poor people means that governments and citizens can do a better job of providing them. Learning from success and understanding...

Most existing estimates of the macroeconomic costs of AIDS, as measured by the reduction in the growth rate of gross domestic product, are modest. For Africa-the continent where the epidemic has hit the hardest-they range between 0.3 and 1.5 percent annually. The reason is that these estimates are based on an underlying assumption that the main eff...

How can service reforms go from being innovative experiments to being adopted on a national basis? In addition to tailoring service delivery to service and country circumtances, information can play a critical role-as a stimulus for public action, as a catalyst for change, as an input into making other reforms work. Even in the most resistant socie...

Governments in developing countries spend money on goods and services that have an impact on people's exposure to risk. This paper presents a simple approach to valuing such expenditures from the perspective of risk reduction. There are two types of expenditures: public provision of insurance, such as for health care or crop yields; and policies ai...

This article analyzes the productivity of economy-wide investment across countries and tries to obtain some insight into the underlying process generating the aggregate results through a case study of the evolution of the manufacturing sector in Tanzania. We find that low investment has not been the major constraint on development in Africa. In Sec...

In an endogenous-growth model, we consider alternative ways of providing public capital using distortionary taxes. We show that if the government provides the good, the resulting growth rate and welfare may or may not be higher than under laissez-faire. By contrast, if the government subsidizes private providers, not only are growth and welfare hig...

The weak link between public spending in health and education, and health and education outcomes can be partially explained by the fact that the delivery of services that are critical to human development - health, education, water and sanitation - are widely failing poor people. The money is often spent on private goods or on the non-poor; it ofte...

The Millennium Development Goals set quantitative targets for poverty reduction and improvements in health, education, gender equality, the environment, and other aspects of human welfare. At existing rates of progress many countries will fall short of these goals. However, if developing countries take steps to improve their policies and increased...

of Agricultural Statistics, 1994. Department of Agriculture, Republic of South Africa, Pretoria.

The Millennium Development Goals (MDGs) set quantitative targets for poverty reduction and improvements in health, education, gender equality, the environment and other aspects of human welfare. At existing rates of progress many countries will fall short of these goals.

This paper reviews the experience of the use of computable or applied general equilibrium (CGE or AGE) models to affect public policy. The range of issues on which CGE models have had an influence is quite wide, and includes structural adjustment policies, international trade, public finance, agriculture, income distribution, and energy and environ...

Many analysts decry the lack of sufficient investment in Africa, implying that investment in Africa is ‘too low’. We find no evidence that private and public capital are productive in Africa, either in the cross‐country data or in micro‐data from Tanzania. In this restricted sense, investment in Africa is too high rather than too low.

Many analysts decry the lack of sufficient investment in Africa, implying that investment in Africa is "too low." We find no evidence that private and public capital are productive in Africa, either in the cross-country data or in micro data from Tanzania. In this restricted sense, investment in Africa is too high rather than too low. Shantayanan D...

Incl. bibl., index.

The World Bank is dedicated to the promotion of sustainable economic development and to poverty reduction throughout the developing world. It faces new challenges as capital shortages are replaced by large but volatile capital flows. The contributors to this volume argue that the Bank's greatest asset is its accumulated knowledge and experience of...

for invaluable suggestions, to James Sochacki for the computational algorithm, and to participants in the Research Workshop on Positive Political Economy at Harvard University. Excellent research assis-tance was provided by Calistus Korinjoh. All errors and omissions are entirely mine. 28755 Abstract Focusing on Nigeria, the most populous state in...

We estimate hypothetically optimal allocations of infrastructure investments. These optimal allocations are then compared to actual distributions to generate a measure of economic distortion, called "inßuence costs." Next we examine the extent to which these costs can be attributed to political inßuence on public-capital expenditure decisions. Thus...

This paper examines the impacts of external price shocks in the Malaysian economy. There are three simulations are carried out with different degrees of external shocks using Malaysian Social Accounting Matrix (SAM) and Computable General Equilibrium (CGE) analysis. The model results indicate that the import price shocks, better known as external p...

When foreign aid undermines institutional development aid recipients can exhibit the symptoms of aid"dependence"- benefiting from aid in the short term but damaged by it in the long term. The authors find that one equilibrium outcome can be high aid and weak institutions, even when donors and recipients fully anticipate aid's effects on institution...

If a donor gives aid for a project that the recipient government would have undertaken anyway, the aid finances expenditures other than the intended project. The notion that aid in this sense may be"fungible"has recently received empirical support. The authors look at why aid isfungible or nonfungible, and the extent to which it is fungible in Sub-...

We examine the effects of labor market rigidities on the outcome of trade liberalization using a general-equilibrium model of Bangladesh. When there are no labor market distortions, the poorest households experience a real-wage increase following trade liberalization. When there are either severance pay regulations or minimum wages, the poorest hou...

A foreign aid or foreign lending policy that focuses exclusively on project financing may have unintended consequences, report the authors. New research shows that aid intended for crucial social and economic sectors often merely substitutes for spending that recipient governments would have undertaken anyway and the funds that are thereby freed up...