Development Economics

The Development Matrix: Wake Up

Two World Bank economists scientifically prove that first-world countries pay more than third-world countries:

Ask most people to name the most effective means of raising incomes of people in poor countries, and what would they say? Microfinance? Perhaps not after the recent experimental assessments. Deworming? It increased primary school participation and improved health, but in the short-term at least seems unlikely to raise household income. Conditional cash transfers? This might be a popular answer, with evidence from a number of countries that they have increased household expenditure , schooling, and health outcomes. But even though Governments devote significant resources to such programs, the absolute annual increases in household income and expenditure are still at most US$20-40 per capita for participating households. I bet that facilitating international migration is not very high up the list of interventions people think of. But it should be. In a new working paper, John Gibson and I evaluate the development impacts of New Zealand’s new seasonal worker program, the RSE. The figure below compares the per-capita income gain we estimate to those from microfinance, CCTs, and from my previous research giving grants of $100-200 to microenterprises. It is simply no contest!
Really?  The finding here is that seasonal migrant workers who move to developed countries make much more money than they could were they to participate in economic development projects?  The fact that this is even worth the ink it is printed on seems crazy to me.   (more…)

Development Economics

Stephen Colbert Calls Bullshit on Congress

This is not a blog about domestic agriculture policy, nor is a blog about politics.  But mental gymnastics create the necessary link between Stephen Colbert's address to the House subcommittee on immigration and the main theme of this blog, poverty alleviation in the developing world.  I enjoyed this clip, not only because I harbor not a small amount of contempt for politicians in general and, in particular, the U.S. congress, but also because it is a good lesson in the cognitive dissonance of supporting free market principles and toughness on immigration. In short, migrant workers will work for less at harder jobs than most Americans.  That is true in the U.S. and outside the U.S.   If migrant workers cannot come to the U.S. to work on U.S. farms, then U.S. farms will move to where labor is cheapest: the home countries of migrant workers.  Putting on the blinders and ignoring the fact that migrant workers are currently lowering prices (or at least making farmers richer) by reducing production costs is like anti-free market.  Over to Colbert:

"So what's the answer?  Now I'm a free market guy.  Normally I would leave this to the invisible hand of the market, but the invisible hand of the market has already moved 84,000 acres of production and 22,000 farm jobs to Mexico and shut down over a million acres of U.S. farmland due to lack of available labor.  Because apparently, even the invisible hand doesn't want to pick beans."
When this principle is applied to trade, it is called protectionism, a policy diametrically opposed to the concept of free trade and a pro-market approach in general.  (more…)