Miguel Niño-Zarazúa

Social protection in sub-Saharan Africa: Will the green shoots blossom?

This paper provides an overview of the recent extension of social protection in sub-Saharan Africa. It identifies two main ‘models’ of social protection in the region: the Southern Africa and Middle Africa models. It then assesses the contrasting policy processes behind these models and examines the major challenges they face as regards financing, institutional capacity and political support. It concludes that, for an effective institutional framework for social protection to evolve in sub-Saharan African countries, the present focus on the technical design of social protection programmes needs to be accompanied by analyses that contribute to also ‘getting the politics right’

Financing Social Protection for Children in Crisis Contexts

The global financial crisis has emphasised the fundamental role of social protection institutions in developing countries. There is also growing evidence that countries with programmes focused on children have a greater chance of minimising the longer-term effects of the crisis. However, financing remains a major challenge: the effects of a slowdown in growth are likely to reduce the fiscal space in low-income countries. Focusing on sub-Saharan Africa and Latin America in particular, this article shows that improved fiscal balances, debt relief, aid and revenues from natural resources could provide a window of opportunity in many countries. Raising the ratio of tax revenues to GDP is, however, the main challenge in the medium term.

Ethnic Heterogeneity and Public Goods Provision in Zambia: Further Evidence of a Subnational ‘Diversity Dividend’

The “diversity debit” hypothesis – that ethnic diversity has a negative impact on social, economic, and political outcomes – has been widely accepted in the literature. Indeed, with respect to public goods provision – the focus of this article – the conventional wisdom holds that a negative relationship between ethnic heterogeneity and public goods provision is so well-established empirically that future research should abandon examination of whether such a relationship exists and focus instead on why it exists, that is, on the mechanisms underlying a negative relationship. This article challenges the conventional wisdom on empirical grounds. It demonstrates at the sub-national level strong evidence for a “diversity dividend” – that is, a positive relationship between ethnic heterogeneity and some measures of public goods provision, in particular welfare outcomes related to publicly provided goods and services. Building on the literature, the article draws on new analysis at district level for Zambia, using a new dataset compiled by the authors from administrative, budget, and survey data, which cover a broader range of public goods outcomes than previous work, including information on both budgetary and welfare outcomes. The article explores why relationships may differ for sub-national budgetary and welfare outcomes, considering separate models for each. Analysis shows results to be robust across a variety of alternative specifications and models. Given the more nuanced relationship between ethnic diversity and public goods provision documented, the article argues that the key task for future work is not to address why the relationship is negative, but to study under what conditions such direction holds true, and the mechanisms that underlie a diversity dividend. It concludes by considering key explanatory hypotheses against the Zambian data to identify promising areas for such theory development. More broadly, while the diversity debit hypothesis highlights the costs of diversity and could be interpreted as providing support for polices that minimize it, the findings in this article are consistent with a view that diversity can be good for communities, not only for normative reasons, but also because, under some conditions, it can support concrete welfare gains.

Mexico’s Progresa-Oportunidades and the Emergence of Social Assistance in Latin America

This paper provides an overview of the political and economic context under which Mexico’s Progresa-Oportunidades was introduced to prelude the emergence of social assistance in Latin America. The paper identifies four distinctive features of the programme that were revolutionary in their own right. First, the Progresa-Oportunidades embraced a multidimensional approach to poverty, linking income transfers with simultaneous interventions in health, education and nutrition. Second, the programme focused on the poor. This is in clear contrast to generalised food subsidies and other targeted interventions that dominated the antipoverty agenda in the past. Third, the programme followed a complex system of identification and selection of beneficiaries to prevent discretionary political manipulation of public funds. Finally, an independent impact evaluation protocol proved to be critical for both improving the programme’s effectiveness and strengthening its legitimacy across different political factions and constituencies. The paper concludes that the success of Progresa-Oportunidades must be understood in a broader context, where a harsh economic and political environment, coupled with a rapid democratisation and increasing political competition, laid down the foundations for the introduction and then sustained expansion of the programme.

GLOBAL INEQUALITY: RELATIVELY LOWER, ABSOLUTELY HIGHER

This paper measures trends in global interpersonal inequality during 1975–2010 using data from the most recent version of the World Income Inequality Database (WIID). The picture that emerges using ‘absolute,’ and even ‘centrist’ measures of inequality, is very different from the results obtained using standard ‘relative’ inequality measures such as the Gini coefficient or Coefficient of Variation. Relative global inequality has declined substantially over the decades. In contrast, ‘absolute’ inequality, as captured by the Standard Deviation and Absolute Gini, has increased considerably and unabated. Like these ‘absolute’ measures, our ‘centrist’ inequality indicators, the Krtscha measure and an intermediate Gini, also register a pronounced increase in global inequality, albeit, in the case of the latter, with a decline during 2005 to 2010. A critical question posed by our findings is whether increased levels of inequality according to absolute and centrist measures are inevitable at todays per capita income levels. Our analysis suggests that it is not possible for absolute inequality to return to 1975 levels without further convergence in mean incomes among countries. Inequality, as captured by centrist measures such as the Krtscha, could return to 1975 levels, at todays domestic and global per capita income levels, but this would require quite dramatic structural reforms to reduce domestic inequality levels in most countries.

Social spending and aggregate welfare in developing and transition economies

Notwithstanding the unprecedented attention devoted to reducing poverty and fostering human development via scaling up social sector spending, there is surprisingly little rigorous empirical work on the question of whether social spending is effective in achieving these goals. This paper examines the impact of government spending on the social sectors (health, education, and social protection) on two major indicators of aggregate welfare (the Inequality-adjusted Human Development Index and child mortality), using a panel dataset comprising 55 developing and transition countries from 1990 to 2009. We find that government social spending has a significantly positive causal effect on the Inequality-adjusted Human Development Index, while government expenditure on health has a significant negative impact on child mortality rate. These results are fairly robust to the method of estimation, the use of alternative instruments to control for the endogeneity of social spending, the set of control variables included in the regressions, and the use of alternative samples.

Global Interpersonal Inequality: Trends and Measurement

This paper discusses different approaches to the measurement of global interpersonal in equality. Trends in global interpersonal inequality during 1975-2005 are measured using data from UNU-WIDER’s World Income Inequality Database. In order to better understand the trends, global interpersonal inequality is decomposed into within-country and between-country inequality. The paper illustrates that the relationship between global interpersonal inequality and these constituent components is a complex one. In particular, we demonstrate that the changes in Chinas and Indias income distributions over the past 30 years have simultaneously caused inequality to rise domestically in those countries, while tending to reduce global inter-personal inequality. In light of these findings, we reflect on the meaning and policy relevance of global vis-a- vis domestic inequality measures.

Aid, Political Business Cycles and Growth in Africa

This paper develops a model of opportunistic behaviour in which an incumbent government resort to expansionary fiscal and/or monetary stimuli to foster economic growth and thus, maximize the probability of re-election. Using a panel dataset of 51 African countries covering the period 1980 to 2012, we test first, whether aid and institutional quality factors have an effect on growth. We find evidence to support the most recent studies showing that aid has a positive impact on growth. We however, do not find evidence to support the proposition that institutional quality is a sine qua non conditional for aid to achieve impact on growth. Second, we test whether donor aid facilitates political business cycles, and investigates their effect on growth. We find evidence that donors, through guaranteeing support to incumbent governments, unwittingly do instigate political business cycles. Forbearance, and sometimes complicity by donors, aid seems to allow incumbent governments to instigate macroeconomic stimuli that ensure electoral victory with no fear of losing aid.

The Impact of Credit on Income Poverty in Urban Mexico. An Endogeneity-Corrected Estimation

In recent years, an important number of impact studies have attempted to examine the effect of credit on income poverty; however, many of these studies have not paid sufficient attention to the problems of endogeneity and selection bias. The few exceptional cases have employed econometric techniques that work at the village level. The problem is that the concept of village is inappropriate in the urban context where a large percentage of microfinance organisations in the developing world actually operate. This paper presents an econometric approach which controls for endogeneity and self-selection using data from a quasi-experiment designed at the household level, and conducted in three urban settlements in the surroundings of the Metropolitan area of Mexico City. The paper provides an estimation of the impact of credit, employing different equivalence scales in order to measure the sensitivity of the poverty impact to the intra-household distribution of welfare. We find a link between poverty impacts and lending technology. Group-based lending programmes are more effective in reducing the poverty gap but in doing so, they achieve insignificant impacts on the poverty incidence. By contrast, individual lending programmes reported significant and small impacts at the upper limits of deprivation but insignificant impacts on the poverty gap.

Microcredit, Labour, and Poverty Impacts in Urban Mexico

Improved household accessibility to credit is a significant determinant of intra�?household allocation of labor resources with important implications for productivity, income, and poverty status. However, credit accessibility could also have wider impacts on poverty if it leads to new hires outside the household. This paper contributes to the existing literature on microcredit in two important ways. First, it investigates the routes through which microcredit reaches those in poverty outside the household. We test whether by lending to the vulnerable non�?poor microcredit can indirectly benefit poor laborers through increased employment. Second, we conduct the study in the context of urban poverty Mexico. This is relevant when considering that labor often represents the only source of livelihoods to the extreme urban poor. Our findings point to significant trickle�?down effects of microcredit that benefit poor laborers; however, these effects are only observed after loan�?supported enterprising households achieve earnings well above the poverty line.