Can aid help countries avoid the middle-income trap?

BannerWeb1122_DiT_EN_with logo DEV

By Homi Kharas, Interim Vice President and Director – Global Economy and Development, Brookings Institution


This blog is part of an ongoing series evaluating various facets
of 
Development in Transition


Middle-income-trapMost aid agencies have tried to articulate a “middle-income” strategy for how to support client countries that are no longer poor. For example, see the Asian Development Bank Strategy 2030 and the World Bank’s approach to middle-income countries. In both cases, there is an emphasis on second-generation challenges, including those related to environmental, social and governance institutions. Failure to meet these challenges can trap countries in middle-income status.

The problem, however, is that there is no solid theoretical or empirical foundation on how to support growth in middle-income countries—the diversity of contexts and experiences is so large that robust policy conclusions are hard to draw, and useful interventions by aid agencies even harder to figure out.

Barro (2012) succinctly summarizes the limits of empirical work: “My view is that one has to accept the idea that pinpointing precisely which X variables matter for growth is impossible.” In a similar vein, Rodrik (2012) titled his paper “Why We Learn Nothing from Regressing Economic Growth on Policies.” Most researchers (see for example Jones (2016) and Kim and Park (2017)) find that middle-income growth is all about total factor productivity growth (TFP). TFP growth, in turn, is what is left over after accounting for the growth of all inputs. Jones breaks down TFP into two components: knowledge/ideas and M that he says stands for either misallocation or a measure of ignorance. Continue reading

Shifting public and private finance towards the Sustainable Development Goals 

By Paul Horrocks, Priscilla Boiardi and Valentina Bellesi, OECD Development Co-operation Directorate 


This blog is part of the upcoming OECD Private Finance for Sustainable Development Conference that will take place on 29 January 2020


dev-cooperation-puzzle-handBack in 2015, the international community committed to a shared global vision towards sustainable development – the 2030 Agenda – including 17 Sustainable Development Goals (SDGs).

The Goals identify the areas in which resources are most needed. But with the realisation that meeting the Goals by 2030 would require filling an annual financing gap of 2.5 trillion dollars, the Addis Ababa Action Agenda (AAAA) called upon a broader mobilisation of resources, including private ones.

Five years on, progress remains slow and uneven.

Three critical questions emerge from this context: How can we drive more resources towards the Goals? How can we make sure they are going where they are needed most?

And are they being used in the most effective way?

In order to guide the answers to those questions, we propose a three-step approach: Mobilisation, Alignment and Impact. Continue reading

Five Takeaways on Migration and Development

By Jason Gagnon, Development economist, OECD Development Centre

migration

Migration can lead to important gains for migrants, for their countries of origin and their destination. But this can only happen if migration happens under the right conditions. Destination and origin countries increasingly face common global challenges such as climate change, new technologies and long term changes in social behaviour. Furthermore, developing countries often have to manage and integrate migrant influxes themselves. All of this in a current state of an increasingly negative narrative surrounding migration. So how can migration be better managed? And what is the state of migration governance today? In between the first ever annual UN migration network meeting, and the first Global Refugee Forum (GRF), the OECD Development Centre held a debate – the Policy Dialogue on Migration and Development (PDMD) – with major players, governments, experts and policy-makers looking at the links between migration and development across Africa, Asia, Latin America and the Caribbean. Continue reading

Social discontent in Latin America through the lens of development traps

BannerWeb1122_DiT_EN_with logo DEV.jpg

By Sebastián Nieto-Parra, Mario Pezzini and Juan Vázquez, OECD Development Centre


This blog is part of an ongoing series evaluating various facets
of 
Development in Transition


LATAM-Social-discontent.jpgUntil recently, rising levels of citizen dissatisfaction with public services and institutions in Latin America might have merely been pictured as an upward line in a graph. However, it seems to have reached a breaking point. Growing social discontent has boiled over into protests across several Latin American countries over the past weeks. While these protests are complex and multifaceted, understanding the underlying causes is essential to defining policy priorities that may help address the structural sources of discontent.

GDP growth is not alone in driving social unrest, as protests have not necessarily taken place in countries with the lowest growth rates or at times of lower economic dynamism, like the 2008 crisis.  Furthermore, income gradually ‘delinks’ from well-being outcomes, as countries move up the income ladder. This has clearly been the case for most Latin American countries since the 2000s (OECD et al., 2019a). Continue reading

Helping Cities and Regions achieve the SDGs: Partnering for Decentralised Development Co-operation

By Jorge Moreira da Silva, Director, OECD Development Co-operation Directorate and Lamia Kamal-Chaoui, Director, Centre for Entrepreneurship, SMEs, Regions and Cities (CFE)

 

UrbanisationAll too often international aid is viewed through the traditional lens of nation states. A rich-poor relationship of a developed country providing a one-way flow of financial assistance to a developing country to address crucial development issues, whether they are societal, economic or environmental in nature. However, the impact of these problems is acutely felt at the local level and requires global collaborative responses at the subnational level. Decentralised development co-operation (DDC) – the exchange of resources between subnational governments in developed and developing countries – offers a pragmatic and effective approach to addressing the most critical issues and to achieving the sustainable development goals.

Following the onset of the Syrian crisis, Lebanon has had to provide adequate housing and basic services to over one million refugees, or nearly 20% of the world’s total Syrian refugee population.[1] At the forefront of this daunting task are municipalities, which in most instances critically lack the resources and funding to deliver. Continue reading

Counting the invisible: Three priorities for strengthening statistical capacities in the SDG era

By Johannes Jütting, Executive Head PARIS21, Rolando Avendano, Economist, Asian Development Bank and Manuel Kuhm, Research Support Officer (PARIS21)

markus-spiske-unsplash.jpg

Better policies need better data. High-quality data and official statistics are vital for governments, civil society, the private sector and the public to make informed decisions, create effective polices, and establish good governance. Under the 2030 Agenda for Sustainable Development, data-driven policy making takes on even greater significance. For if we are to “leave no one behind”, we must first ensure that everyone is counted.

Yet today, more than 110 low and middle-income countries lack functional civil registration and vital statistics systems and under-record or omit vital events of specific populations. Those living in poverty are most likely to be excluded—the poorest 20% of the global population account for 55% of unregistered births. Only 37 countries have statistical legislation that complies with the United Nations (UN) Fundamental Principles of Official Statistics.

If we don’t even know who the poorest are, how can we ensure that they aren’t left behind?

At the same time, while a global Sustainable Development Goal (SDG) indicator framework is an essential part of Agenda 2030, it is putting pressure on national statistical systems. In addition to the demand of compiling 232 national-level indicators, the Agenda requires that data are disaggregated by income, sex and gender, geography, age and disability, far beyond current capacity in many developing countries. Continue reading

Forging a new way forward for development co-operation in the face of the climate crisis

By Jorge Moreira da Silva, Director, OECD Development Co-operation Directorate

climate-change

Time is running out. The climate crisis is rapidly altering the systems that underpin life on Earth, multiplying existing threats to development while creating new obstacles. It will influence how countries develop for the rest of this century and beyond. As we head into 2020 — when countries will prepare and submit their next round of commitments under the Paris Agreement to commence its implementation — it is timely to check in on progress so far. Specifically, how donor countries and providers of development co-operation are accounting for climate change and aligning their activities with the objectives of the Agreement to ensure they are not supporting unsustainable development.

The climate crisis is affecting communities across the globe, most recently contributing to catastrophic bushfires in multiple states of Australia.  At the same time in the central and southern parts of Mozambique, at least 1.6 million people are in need of assistance due to the devastating effects of the ongoing drought and increasingly severe weather events linked to climate change. These event have been unfolding just months after disastrous fires in the Amazon, underscoring that we are indeed living in a new normal. Amid these events, at the 2019 United Nations (UN) Climate Action Summit in New York this past September, the OECD brought together over 30 climate and development leaders to urgently discuss the imperative to align the development and climate agendas, reflecting on key messages and priorities for the institutions that provide development co-operation. Continue reading