In March I recounted how former colleagues Michael Clemens, Steven Radelet, and Rikhil Bhavnani wrote an excellent paper in 2004 on the impact of foreign aid on economic growth, “Counting Chickens When They Hatch.” The idea captured in that title is that it is important to think about the likely timing of the impacts of aid. Don’t design your analysis as if you expect that funding for teaching 6-year-olds will raise economic growth in four years. Match the follow-up period to the type of aid. Count your chickens only when they hatch.
Some years later, and joined by another CGD recruit, Samuel Bazzi, those authors overhauled their paper and published it in the top-flight Economic Journal (ungated version). The final version is quite different but also excellent (it won the journal’s best-article prize). Instead of doing its own econometrics afresh, it modifies the three most-cited studies in the aid-growth literature in light of the “counting chickens” insight. Although those studies disagree on whether and when aid “works,” in the sense of boosting growth, Clemens, Radelet, Bhavnani, and Bazzi (CRBB) conclude that revising the studies to take timing into account causes all results to converge, to a ginger but positive appraisal. (Listen to Michael speak cautionarily about “Chickens” in this Library of Economics and Liberty podcast.)
I say “excellent” and I mean it. But, true to type, I actually doubt the econometric reasoning. I am not persuaded by these results that “aid inflows are systematically associated with modest, positive subsequent growth.” More…
The last of my three posts for CGD on redefining Official Development Assistance (ODA) tries to get away from the loan business (which has gotten most of my attention and is the reason the definition of ODA is up for discussion at all). In the new post I talk about what activities ought to dropped from or added to the definition in order to keep it credible and up to date.
The April issue of the Journal of Development Studies includes the final version of my article with Jonathan Morduch replicating the study of the impact of microcredit in Bangladesh by Mark Pitt and Shahidur Khandker. Properly, the journal also carries a reply from Mark Pitt. (Ungated versions of the dueling documents are here and here.) To my surprise, JDS did not solicit a rejoinder from us the way they did in a nearly identical situation involving a JDS editor as replicating author. Perhaps this is a sign of the strength the editors see in our paper…which is to say, maybe I should have just chilled.
But as usual, Pitt’s arguments are strongly worded even as their subject remains technical. So the average reader will absorb the style more than the substance, and wonder, I fear, who are these fools Roodman and Morduch? So for the public record, here is a rejoinder from yours truly. It’s a quote-and-response.
“RM [Roodman & Morduch] have backed off many of their prior claims and methods.”
No. The first version of our paper questions the exogeneity of the core intent-to-treat variables; highlights that an asserted discontinuity in treatment, central to Pitt & Khandker’s (PK’s) claim to quasi-experimental status, is absent from the data; observes that the magnitude of the impact estimates depends on an arbitrary censoring choice for the “log of 0″; and demonstrates that a more-robust linear estimator produces no evidence of impact. Those arguments stand.
I promise this is the last post on the incorporation of loans into the measurement of Official Development Assistance. Actually, it’s a cross-posting of something I just wrote for CGD. Leaving aside the question of whether to factor default risk into the determination of whether a loan is aid, I enunciate four principles for counting loans as aid.
Next week I’ll be in Paris, where I will participate in several meetings at the DAC on these very questions, and present my work to staff. I’m sure I’ll learn a lot about the substance and the process. I’ll report back to you after that.
The Crisis in Official Development Assistance (ODA) Statistics: Needed Revamp Would Lift Japan, Lower France
Sorry for the silence here.
I worked on two main projects over the last month. For GiveWell and GoodVentures, I began reviewing what is known about the economic impacts of immigration in receiving countries, particularly on low-wage workers. GoodVentures is considering labor mobility as an area in which it could actively support policy advocacy. But they want due diligence on the concern that allowing more immigrants in will depress earnings for those already here. I’ll share more of that work when it’s ready.
And for my old employer, the Center for Global Development, I wrote a paper that expands on my earlier work on how foreign aid should be defined for purposes of statistics. CGD posted the paper last Thursday and a blog post about it this morning. Go read that. (More blogging for CGD will follow.)
For many decades, researchers have been asking why some countries are so rich and some so poor. They have offered many answers, from corruption to banking to guns, germs, and steel. A widely if vaguely held view is that “institutions” are central. In seminal work on this theme, Nobelist Douglass North defined institutions as “the rules of the game in a society, or, more formally, … the humanly devised constraints that shape human interaction.” In their recent book, Why Nations Fail, Daron Acemoglu and James Robinson popularize earlier scholarship with Simon Johnson on the historical roots of key institutions that undergird private enterprise, such as rule of law and secure property rights.
My client GiveWell, which is working closely with the new foundation GoodVentures, commissioned me to review the scientific evidence on the impact of deaths on births. When a life is saved, especially a child’s life, do families go on to have fewer additional births than they otherwise would? Is the effect more than one-to-one or less? As I write just below, a criticism sometimes thrown at life-saving interventions is that they do as much harm as good by accelerating population growth.
Last summer the U.N. High-Level Panel of Eminent Persons on the Post-2015 Development Agenda (HLP) released a report that does a fine job of thinking through what international development goals should succeed the Millennium Development Goals, which expire in 2015. Perhaps to the surprise even of its authors, one idea in the report got lots of people talking: the call for a “data revolution”: More…
I’m not sure what this teaches, but I like it.
This 2004 map shows which parts of the world are most “malaria-friendly” as a matter of climate and topography: More…
The title of Bill Easterly’s new book pretty much conveys the message: The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor. Out of arrogance and political convenience, Western donors are designing and financing destructive top-down development “solutions” to be imposed on the poor. The donors are playing into the hands of dictators, even becoming mini-dictators themselves. The just and surer path to economic development lies in respecting the rights of poor people and empowering them to solve their own problems in ways no expert could plan.
In 2012, the top-flight Economic Journal published an article by my former CGD colleagues about the impact of foreign aid on economic growth in receiving countries. It is called Counting Chickens When They Hatch: Timing and the Effects of Aid on Growth (ungated version on cgdev.org). The journal’s publisher, the Royal Economic Society, awarded the authors its annual prize for best article. I think you’ll see why, if you read the paper. It’s sharply written and firmly argued, yet judicious in its conclusions.
It was in Saigon, in June 1999, that I first felt the knot at the base of my lumbar spine. Thirty-one years old, I’d never worried much about taking care of my body. In retrospect, nine months of hunching over my laptop, without a desk in that house Mai and I rented, had done something. I remember, in our last days in Vietnam, hobbling off an escalator and approaching Andrew Steer for a handshake. As head of the World Bank mission there, he was about to keynote a conference at which I would later speak too. I tried to smile and act normal as an invisible hand grabbed my muscles and ligaments from behind and clenched.
But the knot went away after we came back to the States, and I forgot about it. Occasionally it returned… I felt it the year I ported my three-year-old to daycare everyday on the back of my bike. I figured out not to pull so hard on the handlebars when accelerating. That helped. But sometimes I could barely put on my socks.
In the close of my last post, I indicated that I had more to say about how best to count loans as aid. Now I’ll say it.
The Development Assistance Committee (DAC) currently handles loans this way:
To count as Official Development Assistance (ODA), as explained in the last post, loans must meet two criteria:
Last April, former Development Assistance Committee chair Richard Manning penned a scorching alarum in the Financial Times. Unbeknownst to the public, donors were inflating their aid totals by including loans that would profit the donors if paid in full. And the DAC, whose job it is to validate and publish these tallies, had proved feckless in defending the principle that for a loan to count as aid, it should profit the recipient not the donor.
The OECD must put in place a definition of concessionality that reflects the real cost of capital and requires real fiscal effort. It is shocking that the OECD should publish official statistics that allow “different practices” on such a key issue and which make a mockery of its own requirement that loans are concessional in character. It is encouraging OECD finance ministries to get away with murder as they seek to massage reported aid upwards at minimum cost. If the OECD cannot do a professional job on this, the UN should take over the reporting for international aid flows.
David on Twitter
Who has the power to count chickens? davidroodman.com/blog/2014/08/0…
At last, charter schools take legal action against the DC government for unequal funding. dcschoolfundingequity.org