Minhaj Mahmud

Foreign Aid, Foreign Policy, and Domestic Government Legitimacy: Experimental Evidence from Bangladesh

Foreign aid donors make themselves visible as the funders of development projects to improve citizen attitudes abroad. Do target populations receive these political communications in the intended fashion, and does the information succeed in changing attitudes? Despite the widespread use of various mechanisms to communicate information about foreign funding, little evidence exists about their effectiveness. We embed an informational experiment about a US-funded health project in a nationwide survey in Bangladesh. Although we find only limited recognition of the USAID brand, explicit information about US funding slightly improves general perceptions of the United States; it does not, however, change respondent’s opinions on substantive foreign policy issues. We also find that information increases confidence in local authorities. While our results suggest that information about foreign donors can effect attitudinal change, they also suggest that current mechanisms for information transmission might not be sufficient to do so.

Development Transformation in Bangladesh: An Overview

This chapter provides an overview of Bangladesh’s development experience from the viewpoint of industrial and societal transformation. We argue that the successful and accelerated development transformation that Bangladesh has achieved was fueled by three country-specific mechanisms: spectacular development of the ready-made garment (RMG) industry, which resulted in the rapid transformation of the economy from agriculture-based to industry-oriented; significant investments in infrastructure, which has helped to connect the formerly fragmented economy; and penetration of microfinance institutions (MFIs) and NGOs into rural communities that lead to relaxed credit constraints on rural poor households. This chapter also points to some of the challenges faced by the country, which need to be addressed to sustain its economic transformation and social progress.

Urbanization and Subjective Well-Being in Bangladesh

This chapter examines the determinants of life satisfaction among urban dwellers in two densely populated districts of Bangladesh, particularly how urban risk factors such as environmental risks affect individuals’ subjective well-being (SWB). Therefore self-reported happiness is analyzed as a function of perceived environmental quality, risk perceptions, and other conventional economic as well as non-economic variables such as interpersonal trust. The findings here, consistent with most international evidence, suggest that along with conventional variables, perceived environmental quality as well as road safety significantly affect SWB. More interestingly, the effect of an objective measure of neighborhood water quality diminishes when we control for perceived household water quality. These results have conventional policy implications for environmental policies.

Governance Challenges: Institutional Quality and Trust in Bangladesh

The importance of effective political institutions and good governance for development was emphasized by Adam Smith and John Stuart Mill. As noted by North (1990), “the inability of societies to develop effective, low cost enforcement of contracts is the most important source for historical stagnation and contemporary underdevelopment in the Third World.” For example, looking at long-term growth in 40 non-industrialized countries during the period 1850–1950, Reynolds (1983) concluded that political organization and governmental administration appeared to be the most significant variables influencing growth. Following North, economists and social scientists have given serious consideration to the importance of governance for development, which has contributed to a growing literature that broadly suggests that the quality of governance plays a crucial role in economic development (Mauro 1995; Knack and Keefer 1995). Early studies observed that corruption could act as the grease that “turns the wheels of development” (see, e.g., Huntington 1968); however, the opposite view suggests that lower corruption promotes higher income rather than vice versa (see Acemoglu et al. 2001; Kaufmann and Kraay 2002; Rodrik et al. 2002).

Is Multiple Borrowing a Bad Sign? Evidence from Bangladesh and India

In this chapter, we examine household panel data from Bangladesh and India, comparing unique settings of microcredit programs in these two countries to characterize the cause and nature of overlapping borrowing. Empirical findings from Bangladeshi data seem to show consistently “good” overlapping borrowing and the use of small and inflexible loans from multiple microfinance institutions (MFIs) to satisfy large borrowing demand. In contrast, the overall findings from India may support the interpretation of overlapping borrowings as a Ponzi scheme or missing targets. These observed differences between Bangladesh and India might be attributed to the differences in corporate governance in microfinance, as all MFIs in Bangladesh except Grameen Bank are non-governmental organizations (NGOs), whereas a significant proportion of Indian MFIs are regulated for-profit commercial financial institutions.

Non-farm Sector Growth and Female Empowerment in Bangladesh

In this chapter, using a nationally representative panel data set covering the years 1988 to 2008, we investigate the role of non-farm sector growth in facilitating female labor force participation and educational attainment. Our results indicate that the proportion of village non-farm labor force participation is positively associated with female school enrollment as well as other indicators of women empowerment such as marriage and fertility. Looking at the broader set of non-farm occupations from household data, we find that an additional year of education is associated with a 0.17 unit increase in the labor force participation in the non-farm sector and with a 7.5% reduction in the number of childbirths.

Happiness in Life Domains: Evidence from Rural Bangladesh

In this chapter, a two-layer approach is used to explain subjective well-being or happiness in rural Bangladesh. Overall happiness is estimated both as a function of happiness in different life domains and as a function of conventional explanatory variables such as education, income, and health. We also test the happiness–income relationship in different life domains. The results suggest that income explains a large part of the variation in overall happiness and that income is also closely related to various domain-specific happiness. The results have important implications, suggesting that income and happiness move hand in hand in developing countries like Bangladesh, and that to enhance happiness effectively in these societies, it is important to fill any gap in happiness in the economic domain by improving material well-being.

Aiding the Virtuous Circle? International Development Assistance and Citizen Confidence in Government in Bangladesh

ABSTRACT In areas of limited statehood, foreign development assistance often finances public goods and services. Do citizens attribute the presence of this development assistance to their government and thereby generalize about the legitimacy of their own government because of it? In an informational experiment embedded in a nationwide survey in Bangladesh, we find evidence in line with the argument that the presence of foreign aid signals government competence. The informational treatment effects are particularly large among the majority of respondents who perceive high levels of corruption in their country.

Perceptions of foreign aid project quality in Bangladesh

How does information about the presence of foreign financing in a development project change people’s perceptions of that project? Using an informational experiment in Bangladesh, we find that information about US financing of a specific development intervention sends a positive signal about project quality; this effect is concentrated among individuals who are the least likely to have been exposed to the information ex ante. The information does not change the already high demand for foreign aid but does help citizens target their demands toward the existing donor. That foreign funding can be a signal of project quality helps explain an existing finding in the literature that individuals prefer foreign aid projects to government projects.