Devesh Kapur

The World Bank : its first half century

This effort constitutes the most comprehensive and authoritative work to date on the history of the International Bank for Reconstruction and Development, or the World Bank. Author-editors John Lewis, Richard Webb, and Devesh Kapur chronicle the evolution of this institution and offer insights into its successes, failures, and prospects for the future. The result of their intense labors is an invaluable resource for other researchers and a fascinating study in its own right. The work is divided into two volumes. The first is organized thematically and examines the critical events and policy issues in the World Banks development over the last fifty years. Chapter topics include poverty alleviation, structural adjustment lending, environmental programs, the International Finance Corporation (IFC), the International Development Association (IDA), and the evolution of the Bank as an institution. The second volume contains case studies written by experts with experience in the various regions in which the Bank operates. There are chapters on the Banks activities in Korea, Mexico, Africa, South Asia, and Eastern Europe. Volume 2 also contains essays on the World Banks relationship with the United States, Japan, and Western Europe, and its partnership with the International Monetary Fund (IMF). By special arrangement, the authors have had wide-ranging access to confidential documents at the World Bank, making this work a unique source of information on the internal workings of this critical institution. They have also drawn on extensive interviews with current and past Bank officials. Moreover, publication could not be more timely, coming as it does when many in the development community and in the U.S. Congress are questioning the Banks track record and even its reason for existence. The World Bank: Its First Half Century will be of great interest not only to development practitioners but also to students of international relations, development economics, and global finance. During the course of the project, John P. Lewis and Richard Webb were nonresident senior fellows, and Devesh Kapur was a program associate, in the Foreign Policy Studies program at the Brookings Institution.

The causes and consequences of India's IT boom

(2002). The causes and consequences of Indias IT boom. India Review: Vol. 1, No. 2, pp. 91-110.

Ideas and Economic Reforms in India: The Role of International Migration and the Indian Diaspora

India’s economic policies have undergone a paradigm shift in recent years. The reasons for this shift are varied and complex. They include economic crisis, the manifest inimical effects of earlier policies, political and ideational changes in the outside world, and external pressure from international financial institutions and domestic political interests. This essay focuses on another mechanism: the impact of transborder flows of ideas – transmitted through international migration and return by Indian intellectuals and entrepreneurs – on the policy preferences of governing elites. I argue that while these effects are at least as significant as the other factors mentioned above, they are also the least demonstrable. Returning and circulatory elites are imbedded in specific international “epistemic communities.” This allows them to serve as conduits for the diffusion of new ideas and paradigms back to India’s domestic sphere. Patterns of elite migration, combined with certain features of India’s policymaking process and institutional environment, have reshaped the economic preferences of elites, with significant consequences for the trajectory of economic reforms. This is a dynamic that is as likely to increase as to abate as the reform process continues. This article first outlines an analytical framework specifying the factors and mechanisms through which international migration and diaspora have economic effects on a country. It then presents evidence that particular features of India’s migration and its institutions have enhanced the diffusion of ideas, particularly with regard to economic policies. The article concludes by emphasizing the multiple

Expansive agendas and weak instruments: governance related conditionalities of international financial institutions

This paper analyzes the new lending conditionalities of the Bretton Woods institutions in the area of “governance” in a sample of twenty-five upper tranche arrangements in 1999. It finds that the scope and number of conditions, defined both narrowly and loosely, have expanded. Is this expansion likely to improve the quality of the development process? The papers findings are negative based on a retrospective analysis of the effectiveness of conditionalities in shaping borrower behavior as well as the content of the current agenda with respect to three important issues: the problems posed by aggregation and trade-offs among conditionalities; the relative emphasis on external versus internal factors; and the temporal dimension of the institutional underpinnings of “good governance.” The paper argues that the pessimistic prognosis is further reinforced when taking into account the governance and interests of the IFIs themselves and their consequences on the content and enforcement of conditionalities.

Indian Higher Education

If physical capital — its growth and distribution — was central to debate on economic development in the twentieth century, human capital increasingly occupies centre stage in the twenty-first century (Kapur and Crowley, 2008), and this puts a spotlight on education — whether primary, secondary or tertiary. The very promise of higher education for developing countries is also making this a politically contentious issue. Universities are political because they influence the minds of young adults. And they are becoming even more so because of the growing awareness of the distributional implications of higher education. As private provision and international education grow, issues of equity and access become even more salient. Many of the underlying handicaps faced by students from lower socio-economic groups appear to occur much earlier in the life cycle — at the primary and secondary school levels — but policies to overcome them are pressed only in higher education, often too little and too late. Unsurprisingly the attention devoted to higher education in developing countries has focused mainly on its economic effects, especially its links to labour markets. However, there is little understanding about the way in which its impact is mediated by the type of education and its beneficiaries.

The Common Pool Dilemma of Global Public Goods: Lessons from the World Bank's Net Income and Reserves

The function of international organizations (IOs) as suppliers of international or global public goods (GPGs) has received increasing attention in recent years. But in a world with many claimants and limited resources, GPGs are more likely to have common pool properties than be pure public goods. The paper develops a joint-products model of public goods supply by international organizations, examining how specific institutional features of international organizations affect the supply of GPGs. The sources and distribution of the World Banks net income—the single largest source of discretionary funds available annually to an IO—are used as the lens to analyze the issue. The paper examines the tension between control rights on net income (which reside primarily with nonborrowing shareholders) and the sources of net income, which largely lie with minority, borrowing shareholders. The analysis suggests that while the joint-product model of member-country support for international organizations has much merit, institutional features that were incorporated when these institutions were established sharply affect both the absolute magnitude and the distribution ratio of the benefit streams.

The IMF and Democratic Governance

The International Monetary Fund (IMF) and its fellow Bretton Woods financial institution, the World Bank, not only play many roles in the global economy but also affect democratic prospects in many corners of the world. Through structural-adjustment and austerity programs, the Fund and the Bank influence key policies of many nations, especially the poorer developing ones. The story of the Bank and the Fund shows why technocratic, expert-run institutions of global governance are necessarily limited and nondemocratic. Useful as they may be, such institutions can never become the basis for a governance that is at once globe-girdling, objective, and democratic.

Quid Pro Quo: Builders, Politicians, and Election Finance in India

Where elections are costly but accountability mechanisms are weak, politicians often turn to private firms for illicit election finance. Where firms are highly regulated, politicians can exchange policy discretion or regulatory forbearance for bribes and monetary transfers from firms. Due to its regulatory intensity, we focus on the role of the construction sector. Specifically, we argue that builders will experience a short-term liquidity crunch as elections approach because of their need to re-route funds to politicians as a form of indirect election finance. We use variation in the demand for cement to investigate the presence of an electoral cycle in building activity in India consistent with this logic. Using a novel monthly-level dataset, we demonstrate that cement consumption does exhibit a political business cycle consistent with our hypothesis. Additional tests provide confidence in the robustness and interpretation of our findings.

Renewable Natural Resource Shocks and Conflict Intensity

An interesting stream of the civil conflict literature has identified an important subset of civil conflicts with disastrous consequences, that is, those that emerge as a consequence of shocks to renewable natural resources like land and water. This literature is, however, reliant on qualitative case studies when claiming a causal relationship leading from renewable resource shocks to conflict. In this article, we seek to advance the literature by drawing out the implications of a well-known formal model of the renewable resources–conflict relationship and then conducting rigorous statistical tests of its implications in the case of a serious ongoing civil conflict in India. We find that a one standard deviation decrease in our measure of renewable resources increases killings by nearly 60 percent over the long run.

Remittances and Rashomon

Utilizing a novel data set on remittance data for India that matches household surveys to administrative bank data, we investigate the differences in self-reported and actual deposits to Non-Resident Indian (NRI) accounts. There is a striking difference between the perceived and actual frequency, as well as the amount of deposits, to NRI accounts. Our results indicate the presence of non-classical measurement error in the reporting of remittances in the form of deposits to NRI accounts. As a consequence, regression analyses using remittances as an explanatory variable may contain large upward biases instead of the usual attenuation of results under classical measurement error. Instrumental variables estimates are no better; the estimated coefficients from these regressions are more than three times the size of the OLS regression results. The results point to the need to more carefully check the accuracy of the international remittance flows. The wide discrepancies in the Indian case could be both because of inaccuracies in the household survey as well as mis-classification of the Balance of Payment data with some fraction of reported remittances being disguised capital flows (and hence likely to be less stable) rather than current account flows for family maintenance.