Alan Gelb

Identification for Development: The Biometrics Revolution

Formal identification is a prerequisite for development in the modern world. The inability to authenticate oneself when interacting with the state—or with private entities such as banks—inhibits access to basic rights and services, including education, formal employment, financial services, voting, social transfers, and more. Unfortunately, underdocumentation is pervasive in the developing world. Civil registration systems are often absent or cover only a fraction of the population. In contrast, people in rich countries are almost all well identified from birth. This “identity gap” is increasingly recognized as not only a symptom of underdevelopment but as a factor that makes development more difficult and less inclusive. Many programs now aim to provide individuals in poor countries with more robust official identity, often in the context of the delivery of particular services. Many of these programs use digital biometric identification technology that distinguish physical or behavioral features, such as fingerprints or iris scans, to help “leapfrog” traditional paper-based identity systems. The technology cannot do everything, but recent advances enable it to be used far more accurately than previously, to provide identification (who are you?) and authentication (are you who you claim to be?). Technology costs are falling rapidly, and it is now possible to ensure unique identity in populations of at least several hundred million with little error. This paper surveys 160 cases where biometric identification has been used for economic, political, and social purposes in developing countries. About half of these cases have been supported by donors. Recognizing the need for more rigorous assessments and more open data on performance, the paper draws some conclusions about identification and development and the use of biometric technology. Some cases suggest large returns to its use, with potential gains in inclusion, efficiency, and governance. In others, costly technology has been ineffective or, combined with the formalization of identity, has increased the risk of exclusion. One primary conclusion is that identification should be considered as a component of development policy, rather than being seen as just a cost on a program-by-program basis. Within such a strategic framework, countries and donors can work to close the identification gap, and in the process improve both inclusion and the efficiency of many programs

Does Poor Mean Cheap? A Comparative Look at Africa's Industrial Labor Costs

Africa’s industrial progress has been disappointing. With the exception of South African auto components and garments, both of which have benefited from special incentives, Africa exports almost no manufactures that are not based on the processing of raw materials. Despite considerable rhetoric on the need to develop manufacturing as well as support by donors, what limited progress has been made has often been uneven and isolated. Much of Africa’s manufacturing sector is still characterized by a significant economic dualism between a large number of small-scale enterprises in the informal sector and a handful of more efficient large-scale operations in the formal sector. Following on from previous research on “external costs,” this paper compares labor costs and productivity in selected African countries relative to comparators using data for 25 countries from the World Bank’s Enterprise Surveys. We conclude that industrial labor costs are far higher in Africa than one might expect, given levels of Gross Domestic Product (GDP) per capita. Part of this is an “enclave effect”: both labor costs and labor productivity are far higher in Africa, relative to GDP per capita, than in comparator countries. Another part reflects a steeper labor cost curve; as firms are larger and more productive their labor costs increase more in Africa than elsewhere. But there is still a sizeable residual “Africa effect” after controlling for such factors. We cannot test rigorously for the reasons behind these results but consider some plausible explanations. We also consider how Africa’s distinctive pattern, in terms of purchasing power parity exchange rates could affect the results. We conclude with some implications for policy. Certainly there is an urgent need to reduce “external costs,” through focused investments (power) as well as a general improvement in the business climate. However, with the exception of a few countries like Ethiopia, it is not clear that Africa’s low-income level automatically translates into a comparative advantage in low-wage basic manufactures. We argue that it is more likely to reside in sectors closely linked with the rich and varied natural resource endowments of the countries, whether supplying or processing industries.

Oil for Uganda - or Ugandans? Can Cash Transfers Prevent the Resource Curse?

In 2009, commercially exploitable reserves of oil were found in the Albertine Lakes Basin in Uganda. Along with a number of new oil exporters, Uganda now faces the challenge of using the new resources to advance its development agenda, while avoiding the corrosive effects oil often has on governance. This paper considers the tradeoffs and potential impact of alternative uses of the oil rent. It argues that alternative approaches towards absorbing rents should be judged from two perspectives – the direct impact on growth and living standards, and the indirect effect on governance. The Ugandan authorities favor using the oil revenues to build much-needed infrastructure; while this could have very large benefits, evidence of Uganda’s already deteriorating governance and mounting corruption raise questions about its capacity to wisely invest the oil revenues. This paper considers an alternative—distributing oil rents to the population through cash transfers—as a potential tool to mitigate some of the governance risks associated with oil revenues by giving Ugandan citizens a stake in their own resource wealth, and considers the strengths and limitations of such an approach.

Cash at Your Fingertips: Biometric Technology for Transfers in Developing and Resource-Rich Countries

Cash transfers are often a good way for developing countries to address economic and social problems. They are less expensive than directly providing goods and services and allow recipients the flexibility to spend on what they need the most, but for many developing countries, the technical requirements for large-scale programs have been prohibitive. Now, however, biometric technologies have improved and become ubiquitous enough to allow the confident identification and low cost needed to implement successful cash-transfer programs in developing countries. This paper surveys the arguments for and against cash-transfer programs in resource-rich states, discusses some of the new biometric identification technologies, and reaches preliminary conclusions about their potentially very large benefits for developing countries. The barriers to cash-transfers are no longer technical, but political.

Development as diffusion: Manufacturing productivity and sub-Saharan Africa.s missing middle

We consider economic development of Sub-Saharan Africa from the perspective of slow convergence of productivity, both across sectors and across firms within sectors. Why have “productivity enclaves”, islands of high productivity in a sea of smaller low-productivity firms, not diffused more rapidly? We summarize and analyze three sets of factors: First, the poor business climate, which constrains the allocation of production factors between sectors and firms. Second, the complex political economy of business-government relations in Africa’s small economies. Third, the distribution of firm capabilities. The roots of these factors lie in Africa’s geography and its distinctive history, including the legacy of its colonial period on state formation and market structure.

How Can Donors Create Incentives for Results and Flexibility for Fragile States? A Proposal for IDA

International Development Association (IDA) donors and others operating a country performance-based allocation system face two difficult problems: how to strengthen incentives to produce and document development results and how to increase flexibility for fragile states. Fragile states have the greatest need for projects, but their projects tend to rate poorly in performance-based allocations systems, which provide little incentive to produce successful projects in fragile states or other countries. [Working Paper No. 227]

What Determines Purchasing Power Parity Exchange Rates

In an effort to provide a better understanding of the large variation in price levels between countries, we report on a cross-country analysis of national price levels, using Purchasing Power Parity (PPP) data on 168 economies from the most recent 2011 round of the International Comparison Program (ICP). PPPs are used for many purposes, including to set international poverty lines and allocate IMF quotas. The well-known Balassa-Samuelson income effect is not the only factor affecting PPPs, particularly for low- and middle income countries. Structural and policy factors make a difference. Small island states are relatively costly for their income level as are sparsely populated countries. Countries with large subsidy programs – as measured by fuel subsidies – tend to have lower price levels than predicted on the basis of income. More open labor policies – as measured by a higher share of migrants in the labor force – are associated with lower price levels in higher-income countries. The proposition that very poor governance is associated with both low income and high prices receives some modest support. Aid inflows and a negative current account balance are correlated with higher price levels (the latter less strongly), but FDI and remittances are not. We also observe a strong association between inequality and higher price levels, which provides some support for the proposition that the ICP may over-weight globally comparable goods. Our results confirm the tendency for African countries to be more expensive than countries with similar incomes in other parts of the world. We fail to fully explain this phenomenon but offer a number of explanations that together could account for it, including low agricultural productivity. Finally, we confirm the relationship between low PPP price levels and greater competitiveness in manufactures, especially for low and middle-income countries.

Biometric Elections in Poor Countries: Wasteful or a Worthwhile Investment?

Elections have emerged as a leading area for the application of biometric technology in developing countries, despite its high costs and uncertainty over its effectiveness. One-off voter registrations, as practiced in many countries and supported by donors, also often leave nothing behind in terms of permanent, sustainable, identification assets. Why then do donors support such programs? The paper considers the costs and benefits of technology, where the latter involves its potential to reduce the probability of seriously disputed elections that escalate into violence. Based on the limited data available, it finds that a reduction in the probability of post-election violence by only a few percentage points could offset the cost of the technology. However, this is possible only in particular situations where political parties value the legitimacy conferred by elections that are sufficiently credible to provide an acceptable basis for governing, but where democracy is not yet well-institutionalized. One priority is therefore to screen potential cases carefully. Another step towards using technology more effectively would be to build on the powerful momentum created by voter registration drives to strengthen permanent identity assets such as civil registration and national ID programs, so that they can provide a more sustainable foundation for subsequent voter rolls. This is possible with careful planning but may require some reconsideration of institutional mandates.

The Anatomy of Program-for-Results: An Approach to Results-Based Aid

The World Bank’s new Program for Results (PforR) instrument is only the third instrument approved by its Board and the first to directly link disbursements to results. Designed to support programs of service delivery, the program is still in its early stages. This paper provides an overview of the approach and some of the debates on the design of the instrument, including the approaches to safeguards and to “results”, which encompass the strengthening of systems of service delivery as well as the actual delivery of services. It develops a classification of Disbursement-Linked Indicators (DLIs) that can be used to situate the results-based instruments in the context of investment loans (IL) and development policy loans (DPLs) and applies this to the first four PforR operations. Some are shown to approach other results-based formulations (for example COD Aid) while others have a larger overlap with DPLs. The paper notes a number of features of the operations, including the still-modest use of system performance indicators, as opposed to action-based indicators, to link disbursements to systems reform, and the implications for the PforR approach. While it is far too early to judge the success of PforR and its various design features, the paper considers some of the implications, including the meaning of “success” for a results-based operation.

Can Africa Be a Manufacturing Destination? Labor Costs in Comparative Perspective

Our central question is whether African countries can break into global manufacturing in a substantial way. Using a newly-constructed panel of firm-level data from the World Banks Enterprise Surveys, we look at labor costs in a range of low and middle income countries in Africa and elsewhere. Using fixed effects and random effects models, we estimate a set of labor costs, both actual and hypothetical—what would labor costs for Sub-Saharan African firms look like if they were located outside of Africa? What would Bangladeshs labor costs be if it was located on the African continent? Our results suggest that for any given level of GDP, labor is more costly for firms that are located in Sub-Saharan Africa. However, we also find that there are a few countries in Africa that, on a labor cost basis, may be potential candidates for manufacturing—Ethiopia in particular stands out. We conclude with thoughts on the future of manufacturing in Africa.