Monday, May 5, 2008

Does military intervention work in conflict remedy?

Yes, say Paul Collier and Bjorn Lomborg:

A new study for the Copenhagen Consensus project that includes the first ever cost-benefit analysis of United Nations peacekeeping initiatives concludes that military might is an important tool for reducing bloodshed around the world.

Iraq is a misleading guide to the effectiveness of such initiatives. Unlike the vast majority of conflicts, its civil war was sparked by an international war. The far more typical scenario is political violence within a small, low-income, low-growth nation burdened with strong ethnic divisions.

Military intervention wont be the answer in every hot spot; nor should it be the developed world's only response. Post-conflict aid designed to prevent violence from recurring is much more politically acceptable than the use of force, although it is very expensive.

The Copenhagen Consensus study recommends that aid to post-conflict countries be tied to limits on military spending. Placing conditions on aid packages is controversial, but about 11 percent of all aid is currently diverted into military spending, which significantly increases the likelihood of violence. The lower risk of conflict and better use of that money would mean the benefits from aid climb to 4.5 times higher than the costs.

The first cost-benefit analysis of peacekeeping initiatives reveals that the risk of future conflict depends upon the scale of military deployment. Compared with no deployment, spending $100 million on a peacekeeping initiative reduces the 10-year risk of conflict from around 38 percent to 16.5 percent. At $200 million per year, the risk falls further, to around 12.8 percent. At $500 million, it goes down to 9 percent, and at $850 million drops to 7.3 percent.

Because of war's massive costs, each percentage point of risk reduction is worth around $2.5 billion to the world. The most expensive deployment reduces the risk of conflict by a massive 30 percentage points, with 10-year gains of $75 billion, compared to the overall cost of $8.5 billion. This is a very promising investment.


The Importance of Midwives in Nepal

Achieving the MDG on universal access to reproductive health care and to improve maternal health do not require fancy hospitals and high-tech equipments. It can be done locally by utilizing local knowledge and manpower. The UNFPA has recommended the Nepali government to increase investment in training and retaining midwives where they are needed the most. Midwives are especially useful in rural areas, where health posts are either a distant dream or even if there is one, there are no staffs and medicines. And, it is cost-effective and speedier to implement.

When they are properly trained, empowered and supported, midwives offer the most cost-effective and high-quality path to maternal and newborn health, the statement said. Midwives provide care for women during pregnancy, childbirth and the postnatal period. In case of pregnancy complications and emergencies, midwives perform key life-saving functions. They offer reproductive health information and services, including family planning, which allows women to space their next birth, the statement added.

The statement said that there is an urgent need for 334,000 midwives around the world. And midwives need incentives to continue to work, often under difficult conditions, to save women's lives.

There are only a few dozens of midwives in Nepal. According to the Ministry of Health and Population, the country needs 4,000 to 6,000 trained midwives to minimize maternal and child mortality.

New Papers on Informal Sector and R&D Spillovers and Institutions

Both are from the IMF Working Papers.

Measuring the Informal Economy in Latin America and the Caribbean

This paper estimates the size of the informal economy for 32 mainly Latin American and Caribbean countries in the early 2000s. Using a structural equation modeling approach, we find that a stringent tax system and regulatory environment, higher inflation, and dominance of the agriculture sector are key factors in determining the size of the informal economy. The results also confirm that a higher degree of informality reduces labor unionization, the number of contributors to social security schemes, and enrollment rates in education.

International R&D Spillovers and Institutions

The empirical analysis in "International R&D Spillovers" (Coe and Helpman, 1995) is first revisited by applying modern panel cointegration estimation techniques to an expanded data set that we have constructed for the purpose of this study. The new estimates confirm the key results reported in Coe and Helpman about the impact of domestic and foreign R&D capital stocks on TFP. In addition, we show that domestic and foreign R&D capital stocks have measurable impacts on TFP even after controlling for the impact of human capital. Furthermore, we extend the analysis to include institutional variables, such as legal origin and patent protection, in order to allow for parameter heterogeneity based on a country's institutional characteristics. The results suggest that institutional differences are important determinants of total factor productivity and that they impact the degree of R&D spillovers.

Asian Bailout Fund of $80 billion

The Asian countries, mainly the South East Asian nations, have geared up to chip in $80 billion of capital to set up Asian Monetary Fund- the Asian version of the IMF, which obviously would be unhappy because of potential influential/power loss. The countries want to get rid of harsh conditionalities and economic reform packages the IMF imposes on them if they borrow money at times of financial crisis. South Korea was subjected to such restructuring reforms, which were hugely unpopular, after it borrowed $40 billion from the IMF to bail itself out of the 1997-98 financial crisis. The Latin American countries have also formed similar alliance to get rid of the IMF's grip on their economy and its conditionality, which it imposes if countries want to borrow loans at times of financial crisis. Is the relevance of the IMF further diminishing?

At the 41st annual meeting of the Asian Development Bank(ADB)'s board of governors here, finance ministers of the 10 Southeast Asian countries plus South Korea, China and Japan endorsed an agreement by working-level officials to raise a minimum capital of $80 billion to create the fund and advance their previous currency swap accords.

The countries agreed on the minimum amount of the capital and the interest rates that will be charged on the bailout funds. Seoul, Beijing and Tokyo have offered to contribute 80 percent of the seed money to become major shareholders of the fund and other nations are not opposed to it, according to South Korean officials. This means, if the fund has $80 billion in capital, Seoul, Beijing and Tokyo will share $64 billion.

Under the Chiang Mai Initiative adopted in 2000, the ASEAN+3 nations agreed to set up the so-called Asian Monetary Fund to prevent a recurrence of a financial crisis in the Asian region. The system is aimed at helping crisis-hit countries use a common pool of currency reserves to overcome a financial disaster.

Sachs argues for harvesting solar power from deserts

In a column published in Project Syndicate, Sachs argues that the most promising technology in the long term is solar power. He says if most of our energy demand can be fulfilled by harvesting solar power, mainly from deserts, which receive the strongest and highest radiation. Not a bad proposal but is it financially feasible? Do we have the technologies to harvest solar power in such a large scale? It would definitely be cleaner than the present power sources. More funding for research and development in this field is definitely needed.

The most promising technology in the long term is solar power. The total solar radiation hitting the planet is about 1,000 times the world’s commercial energy use. This means that even a small part of the earth’s land surface, notably in desert regions, which receive massive solar radiation, can supply large amounts of the electricity for much of the rest of the world. 

For example, solar power plants in America’s Mohave Desert could supply more than half of the country’s electricity needs. Solar power plants in Northern Africa could supply power to Western Europe. And solar power plants in the Sahel of Africa, just south of the vast Sahara, could supply power to much of West, East, and Central Africa. 

For all of these promising technologies, governments should be investing in the science and high costs of early-stage testing. Without at least partial public financing, the uptake of these new technologies will be slow and uneven. Indeed, most major technologies that we now take for granted – airplanes, computers, the Internet, and new medicines, to name but a few – received crucial public financing in the early stages of development and deployment.  

It is shocking, and worrisome, that public financing remains slight, because these technologies’ success could translate into literally trillions of dollars of economic output. For example, according to the most recent data from the International Energy Agency, in 2006 the US government invested a meager $3 billion per year in energy research and development. In inflation-adjusted dollars, this represented a decline of roughly 40% since the early 1980’s, and now equals what the US spends on its military in just 1.5 days.