Sunday, September 14, 2008

Links of Interest (09/13/08)

1) Dani Rodrik questions whether export led growth strategy still fulfills its purpose (of stimulating growth).

Many countries are trying to emulate this growth model, but rarely as successfully because the domestic preconditions often remain unfulfilled. Turn to world markets without pro-active policies to ensure competence in some modern manufacturing or service industry, and you are likely to remain an impoverished exporter of natural resources and labor-intensive products such as garments.

Nevertheless, developing countries have been falling over each other to establish export zones and subsidize assembly operations of multinational enterprises. The lesson is clear: export-led growth is the way to go.

(The title of this piece is similar to the title of Paul Krugman's 1987 paper: Is Free Trade Passe?)

2) Jones, Ocampo, and Calice propose channeling 1 percent of developing countries' foreign-exchange reserves to investment in infrastructure.

Although economic growth and poverty reduction in many developing countries has been impressive in recent years, a significant increase in investment in areas such as infrastructure is required to sustain such growth in the future. We propose that a very small portion of developing countries’ total foreign-exchange reserves – say, 1% – be channeled to the expansion of existing regional development banks or the creation of new ones that would invest in infrastructure and other crucial sectors.

Indeed, infrastructure investment is recognized as a key ingredient in sustaining and accelerating growth. However, there is a large financing gap. According to the World Bank, developing countries spend an average of 3-4 % of GDP on infrastructure every year, compared to an estimated 7% of GDP required to meet existing infrastructure needs for maintaining rapid growth. This translates into an annual gap of at least $300 billion at current prices.

3) Pedro de Araujo urges to increase condom distribution and awareness among the poor and uneducated in India to avert rising risk of HIV infections.

HIV knowledge in the Indian population is very poor. Seventeen percent of males and 40% of females say that they have never heard of HIV/AIDS. These numbers are much higher when compared to responses from populations of sub-Saharan African countries. Those who said they knew of AIDS were not necessarily very knowledge: when asked if a healthy looking person could have AIDS, 27% of males and 38% of females did not know the answer. These statistics raise some concerns as to how inadequately prepared the population is in the advent of an outbreak. Another point of concern is the reported levels of stigma in the population. Thirty six percent of males and 37% of females would not buy vegetables from an HIV-infected person. This variable is the most commonly used proxy to measure stigma in these surveys.

...Even though a great part of the Indian population is faithful and abstains from sex, there are still large segments of the population at risk of contracting HIV. Because condom use is very low and knowledge about the disease is very poor, especially with respect to females and poorer and uneducated single males, preventive policies should be targeted at these groups by increasing condom distribution and awareness, increasing substantially HIV/AIDS basic education, and promoting women’s empowerment particularly with respect to sexual choices.

4) Brookings papers: The unofficial Economy and Economic Development (by Rafael La Porta and Andrei Shleifer) and The Real Exchange Rate and Economic Growth (by Dani Rodrik)..links via Rodrik's blog.

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