Week 6 - The Second Tragedy


"This is the tragedy of the West spending $2.3 trillion on foreign aid over the last five decades and had not managed to get twelve-cent medicines to children to prevent half of malaria deaths. The West spent $2.3 trillion and still had not managed to get four-dollar nets to poor families. The West spent $2.3 trillion and still had not managed to get three dollars to each new mother to prevent five million child deaths. (...) It's a tragedy that so much well-meaning compassion did not bring these results for needy people."

Easterly, in The White Man's Burden

Questions

Why does aid fail to reach those who need it? If there is a potential demand for low-cost products that could improve the lives of the poor, why aren't markets providing them? Are there particular characteristics of poor countries impeding the development of markets?


References


Chapters 1 and 2 in Banerjee, Abhijit V. and Esther Duflo (2012) Poor Economics, Penguin Books (pp.: 1-40)

Banerjee and Duflo (2009), "The Experimental Approach to Development Economics", Annual Review of Economics, pp: 151-178

Blattman et al (2018) A longer run perspective on cash transfers (not the real title) , summarized in Vox.

Drèze, Jean (2018), "Evidence, Policy, and Politics", Ideas for India
Chapter 7 in Deaton (2013), The Great Escape, PUP: pp: 267-324

Deaton, Angus (2010), "Instruments, Randomization, and Learning about Development", Journal of Economic Literature pp: 424-455. (You can skip section 3)

Ohler et al, "Does conditionality work?", European Economic Review, 2012.
Chapters 10, 11, and 12 in Ray, Debraj (1998), Development Economics, Princeton University Press
Chapters 1, 3, and 5 in Easterly, William (2006), The White Man's Burden, Penguin Books (pp.:3-33, 60-111, 165-207)
Chapters 8, and 9 in Sachs, Jeffrey D. The End of Poverty  (pp.:148-187)

Assignments


assignment 1

"Observational studies cannot establish causality, while experimental studies have limited external validity, so quantitative empirical research is irrelevant to public servicepolicy decisions in developing countries." Discuss, illustrating your answer with examples chosen from any of health, education or fertility policy.

Assignment 2

"Foreign aid works well in countries with weak institutions only when it imposes obligations obligations on the recipient government which they would have been unwilling to pursue." "In countries with weak institutions, foreign aid should be channelled through NGOs rather than through the government budget" Do you find either of these claims persuasive?

assignment 3

A programme was piloted in one region of a developing country to provide a cash transfer to poor households (whose per capita income is below two dollars a day) if  they allowed their children to be vaccinated. Subsequently, researchers found that the children from eligible households who had been vaccinated were on average healthier, and 10% more likely to go to school, than the children from eligible households who had not been vaccinated. The government intends to expand the programme to other
regions.
(a) Discuss why the estimate of the impact is problematic and explain how a better estimate could be obtained.
(b) Should the government expand the programme?