F. Desmond McCarthy

Malaria and Growth

The authors explore the two-sided link between malaria morbidity and Gross Domestic Product (GDP) per capita growth. Climate significantly affects cross-country differences in malaria morbidity. Tropical location is not destiny, however: greater access to rural health care and greater income equality are associated with lower malaria morbidity. But the interpretation of this link is ambiguous: does greater income inequality allow for improved anti-malaria efforts, or does malaria itself increase income inequality? Allowing for two-sided causation, the authors find a significant negative causal effect running from malaria morbidity to the growth rate of GDP per capita. In about a quarter of their sample countries, malaria is estimated to reduce GDP per capita growth by at least 0.25 percentage point a year.

Population aging and pension systems : reform options for China

Using an integrated simulation model, the authors estimate the scope and speed of population-aging in China, the cost of supporting the old, and the impact of different reform options and pension arrangements. Among their conclusions: The scope and speed of population-aging in China make the present pension system financially unsustainable, even assuming that GDP grows steadily in the long term. Moving the retirement age back would provide a temporary fix for the current pay-as-you-go pension system but would be politically viable only where there is great demand for labor. Pension funds could be made more sustainable by increasing GDP growth, raising contribution rates, or gradually reducing benefit rates. But the financial costs and social obstacles of those reform options must be carefully assessed. Fully funded, privately managed pension schemes might be feasible, but require a sound regulatory framework and institutional infrastructure, including financial markets that provide adequate savings instruments and insurance options. Pension reform is a long-term, multidimensional problem involving economic, social, political, and cultural factors. Governments should not focus only on taxes and transfers to redistribute income to and among the elderly. Real income growth is needed to cope with poverty among the elderly, especially in developing countries. To establish an adequate, efficient, and equitable social security system, China must maintain long-term socioeco nomic stability and sustainable growth. China could improve the labor market by removing management rigidities, facilitating human resource development, making labor markets more competitive, improving the household registration system, improving incentives, and rewarding hard and innovative work. To reduce unemployment, China can create more job opportunities in nontraditional sectors, especially its underdeveloped service industries. To shift jobs to the nonagricultural sector, it can develop medium-size cities. And to cushion the impact of demographic shocks, China should preserve traditional values and maintain family-community support. Drawing on experience in Europe and Latin America, China should move toward a transparent and decentralized system with 1) a fully funded, portable, defined-benefit pension plan, designed to meet basic needs, and 2) occupational pension plans or personal savings accounts to satisfy demand for maintaining or improving living standards.

Economic performance in small open economies : the Caribbean experience, 1980-1992

The authors study the economic performance of ten Caribbean islands in two groups: six small islands from the Organization of Eastern Caribbean States (OECS) and four larger islands: Barbados, Dominican Republic, Jamaica, and Trinidad and Tobago. They compute external shocks together with each islands performance response to them. Some islands resorted inordinately to external financing to cope with adverse shocks. Others tried to compensate by stimulating exports and tourism. The buildup of debt created problems for some of the governments later in the decade, resulting in the need for strong contractionary measures. But the difference in performance between islands cannot be explained by external shocks alone. The OECS group achieved superior performance even though they faced roughly the same shocks as the larger islands. It helped that they had a monetary board that encouraged high investment levels. But this was complemented by concessionary flows used productively and by foreign direct investment. Now the question is how well these economies will fare when they face the inevitable reduction in concessionary flows in coming years.

Welfare effects of tied food aid

Abstract An important part of the overall U.S. aid program is Public Law 480 food aid. The design of the program seeks to satisfy numerous and often conflicting objectives. Several constraints have been placed on the use by recipient countries of that aid to insure that the intentions of the program are achieved. This paper examines the implications for recipient country welfare of both the traditional and the proposed restrictions on PL480 aid. It also seeks to clarify the interpretation of empirical work on the effects of this aid. It is shown that the net value of such commodity tied aid is simply the grant component of the subsidized sale and may easily be realized by substituting food aid imports for commercial imports. Restrictions which prevent aid recipients from doing so are costly to the recipient and could lead even to immuserization. Empirical evidence obtained by others is consistent with the notion that such restrictions are circumvented, where possible, by food aid recipients. The results presented indicate that a ‘Schultzian’ disincentive effect is characteristic of a closed economy. Typical interventions on the part of recipient country governments do not effectively reclose the economy. Hence, open economy models are more appropriate frameworks for evaluating the effects of PL480 aid.

Creating Partnerships for Capacity Building in Developing Countries: The Experience of the World Bank

The authors discuss a variety of experiences in a number of transition, and developing countries to build institutional capacity for economics education. A flexible approach met with some success. The approach uses partnerships that combine the often different needs of a number of private donors, with the World Bank on the supply side. Much of the success was due to adopting each effort to the individual country situation. The authors also provide a brief summary of five academic institutions, and four research networks in Europe, Africa, Asia, and Latin America.

Comparative Life Expectancy in Africa

For health outcomes, is poverty destiny? The authors explore this question for life expectancy in Africa, where health outcomes are positively correlated with income, but where the link is far from uniform. The key variables associated with good health outcomes (controlling for health expenditures) are access rates - to health services, to clean water and sanitation, and to education, particularly for women. Health expenditure, either as percentage of GNP or per capita, is not a good predictor of health outcomes (endogeneity aside). The tenuous link among health expenditures, health service outputs, and health outcomes suggests marked differences in the mapping from spending to services and from services to outcomes. While few conclusions can be drawn on the aggregate level, the patterns raise questions about what share of public expenditure should be devoted to preventive as opposed to curative measures, and the relative importance of sanitation infrastructure versus traditional health care.

Poverty is not destiny: comparative life expectancy in Africa

6 Finance and competition 107 William Darity, Jr., Bobbie L. Horn and Michael Syron Lawlor 7 The macroeconomic role of speculative assets under import compression and financial repression 136 Jørn Rattsø 8 Financial fragility in developing economies 157 Duncan K. Foley 9 Selling the family silver or privatization for capital inflows: the dual dynamics of the balance of payments and the exchange rate 169 Amit Bhaduri