Development

Maxim Pinkovskiy, Xavier Sala-i-Martin, 26 June 2016

When it comes to measuring GDP, researchers tend to use the latest vintage of the Penn World Tables. However, competing series like the World Development Indicators (WDI) and changing methodologies between vintages mean this is not necessarily the best approach. This column assesses the relative performance of different GDP estimators using night-time lights as an unbiased predictor of the growth rates of unobserved true income. Newer versions of the Penn Tables are not necessarily improvements on their direct predecessors.  Newer versions of the WDI index, especially the 2011 vintage, appear generally better at measuring cross-country income differences.

Orazio Attanasio, Sarah Cattan, Sonya Krutikova, 09 June 2016

The importance of investment in children’s pre-school years for their later life outcomes is increasingly recognised by policymakers. This column surveys the evidence on early childhood development policies in both developed and developing countries. Research suggests that effective education programmes can be implemented at scale even in low-income settings, but the quality of the service and adapting it to the local context are crucial. Sustaining the gains from intervention in the ‘early years’ is also likely to require continuing investment at later stages of childhood.

Alexander Bick, Nicola Fuchs-Schündeln, David Lagakos , 04 June 2016

The development accounting literature tries to account for cross-country output per worker differences by taking stock of inputs per worker. The data employed are often measured without great precision, however, making comparisons difficult. This column presents a new, internationally comparable dataset of average hours worked per adult across the world income distribution. Adults in poor countries are found to work a lot more and with lower productivity than those in rich countries. The findings suggest that those from poorer countries are not only ‘consumption poor’, but also ‘leisure poor’. 

Marcela Eslava, Xavier Freixas, 31 May 2016

Public development banks play a significant role in the allocation of credit to businesses that may be unable to attain credit under normal circumstances, despite generating positive externalities. But there is concern that lending by these institutions may end up being allocated inefficiently. This column considers the costly screening that banks must do to allocate funds. It finds that the inefficient allocation of credit may arise when banks are unable to fully internalise the benefits of possible projects. Direct lending and the implementation of subsidies for intermediated lending are two possible ways to counter expensive screening.

Gilles Duranton, Ejaz Ghani, Arti Grover Goswami, William Kerr, 27 May 2016

Optimising the allocation of factors of production improves productivity. In India, where evidence suggests land is severely misallocated to inefficient manufacturing firms, access to financing is disproportionately tied to access to land. This column examines the link between the misallocation of land and access to capital through financial markets. A very strong positive correlation emerges between the two, consistent with the fact that land and buildings can provide strong collateral support for accessing finance from the credit market.

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