Transcript Slide 1
Achieving Growth to Reduce Poverty L. Alan Winters Chief Economist Department for International Development 27th January 2011 Shares in Long-run Poverty Reduction (Kraay cross-section) growth sensitivity distribution Watts FGT 2 FGT 1 FGT 0 0% 20% 40% 60% 80% 100% Share of poverty reduction January 2011 22 Page Growth is …. • A private sector phenomenon • Governments facilitate, don’t do • Long run • Is due to improvements in productivity (allocation is static, even if important) • which requires innovation • Freedom for private sector to respond to signals • which requires appropriate governance Page 3 Growth Statistics Income Classification No. observations/ countries Mean Growth % Std. Dev. Absolute First df. Min % Max % (B) Classified by GNI per capita 1962 Low 1100 (23) 1.97 5.53 6.15 -47 38 L. Middle 1774 (37) 1.92 5.11 4.33 -50 36 U. Middle 862 (18) 2.58 3.66 2.76 -18 23 192 (4) 2.04 2.03 1.56 -7 7 High Source: L Alan Winters, Wonhyuk Lim, Lucia Hanmer, Sidney Augustin (2010) Page 4 Accelerations, Collapses and Stagnation Growth Accelerations Economic Reform + Political Change + Terms of Trade Shock Financial Liberalisation Growth Collapses & Stagnation Decreases in Exports Economic flexibility Institutions Page 5 Sustained Long Run Growth “no recipes, just ingredients” Five Common Characteristics Michael Spence, of Successful Growth 2010 1. Exploitation of world economy 2. Macroeconomic stability 3. High rates of saving and investment 4. Markets allocating resources 5. Committed, credible, capable government Page 6 Escaping from Growth Collapses and Achieving Sustained Growth • Trade & Openness • Financial Sector Development • Macroeconomic Stability • Human Development • Infrastructure • Skills Investment is the Common Theme Governance is the Common Requirement Page 7 Implementing Reforms • Vision • Priorities and focus • But remember possible interactions • Consult and Communicate • Private sector, population, even public sector • Identify needs/wishes, constraints • Identify pressure points • Clear messages, consistent policy • Ongoing – reform fatigue, adjust to shocks Page 8 Implementation – Credible Packages • Short run and long run? • Both but not necessarily at the same time • Fair distribution → politically sustainable • Successful reform outlives governments • Ensure that ‘poverty’ argument is addressed sensibly and not captured by interests • Flexibility within agreed principles • Shocks happen • Markets offer flexibility – but explain this Page 9 India Deregulation and Labour Markets • Industries Act 1951 → control of all • De-licensing – one-third of industries in 1985, most or rest 1991 • Industrial Disputes Act 1947 • Amended extensively by states – some ‘prolabour’, some ‘pro-employer’ • Both reforms boost firm numbers and real output • But biggest gains from combination of de- licensing and ‘pro-employer’ reforms Aghion, Burgess, Redding, Zilibotti (2009) Page 10 Chile – trade and labour markets • Dramatic trade liberalisation 1973 – averages and dispersion (uniformity as bulwark against lobbying) • Crisis in 1982 → maintained principles of the reform time-bound increases • Wide consultation of interests • Linked to labour market and exchange rate depreciation; a few specific concessions • Edwards and Lederman (1999) Page 11 Chile – outcomes Average Tariff and GDP pc 120 % (of 1998 for GDP) 100 80 tariff 60 GNPpc 40 20 0 73 78 83 88 93 98 Page 12 Uganda – trade, taxes, expenditure, macro • Starting point in 1986 dire • Tax rationalisation and clarity • Tariff reductions and harmonisation • Favouritism dramatically reduced; regulations • Export taxes removed • Explicit poverty polices, PETS Page 13 Uganda – average tariff take increases! Uganda: Growth and Trade 30 % or index 25 av tar 20 tr tax/GDP 15 GDP 10 X/GDP 5 0 86 987 988 989 990 991 992 993 994 995 996 997 998 999 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 year Page 14 Colombia Reforms in 1990s: • Reduced dismissal costs by 60-80% • Elimination of interest rate caps, better financial regulation • Eliminate exchange controls • Freed inward FDI • Deep tariff cuts Eslava, Haltiwanger, Kugler and Kugler (2004, 2010) Page 15 Colombia Total Factor Productivity Page 16 Thank you for listening Page 17 Factors behind pro-poor growth (Kraay) regression of components of poverty reduction on policy variables; long spells only Page 18