How ethnically inclusive are 15 African autocracies?

Interesting recent paper  by Francois, Rainer & Trebbi.

They study how revolution and coup threats shape the size and power sharing of ruling coalitions and give an application using data from 15 sub-Saharan African countries.

Here’s what they find:

“Contrary to a view of African ethnic divisions as generating wide disproportionality in access to power, African autocracies function through an unexpectedly high degree of proportionality in the assignment of power positions, even top ministerial posts, across ethnic groups. While the leader’s ethnic group receives a substantial premium in terms of cabinet posts relative to its size (measured as the share of the population belonging to that group), such premia are comparable to formateur advantages in parliamentary democracies. Rarely are large ethnic minorities left out of government in Africa, and their size does matter in predicting the share of posts they control, even when they do not coincide with the leader’s ethnic group.8 We show how these findings are consistent with large overhanging coup threats and large private gains from leadership. Large ruling coalitions (often more than 80 percent of the population are ethnically represented in the cabinet) also suggest looming threats of revolutions for African leaders.”

I suppose this is not news to specialists, but I was surprised at how ethnically diverse cabinets were in these 15 countries.

Tax Reform in Mexico: transparency versus viability?

Reuters published an interesting interview with Luis Videgaray, Mexico’s Finance Minister.  Videgaray is credited to a large extent in helping Pena Nieto become President.

One big problem in Mexico is the fact that the government (from independence on) has been unable to collect taxes very effectively. The country only collects about 6-8% of its national income in taxes, a rate quite a bit lower than any other OECD country.

The new administration has promised a fiscal overhaul, including finding a way to reduce the informal part of the economy, get states to raise more taxes, and close loopholes. So far so good.

The interesting part of this story is the way in which officials have chosen reform viability over government transparency.

For instance, LV states: “We’ve made a decision not to talk about fiscal reform yet, not even to the ratings agencies. It’s important to have a good technical design but also to be quite sensitive to the political needs of the fiscal reform. The first to know about the design of the fiscal reform … should be Congress.” “We have some very good progress on what we are planning to do on fiscal reform .. (but) we are not talking about it yet.” “It will be large.”

This reminds me of privatization in Mexico, when President Miguel de la Madrid forbade any administration official from using the dreaded word privatization. Instead, they were to call it “redimensionamiento (re-determining of the size of the public enterprise sector) & disincorporación (liquidation, transfer, merger, or selling of state enterprises).” That tidbit is from Judith Teichman’s excellent book Privatization & Political Change in Mexico (University of Pittsburgh Press, 1996). Highly recommended.

Private education, not just for rich kids anymore

One of the best books on development that I’ve read in the last few years is The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves by James Tooley.  I recommend it all the time to grad students in development.  Surprisingly, there are tens of thousands of private schools that operate on a shoestring and educate poor children in developing countries.  It was a surprise to Tooley as well, and the story of him uncovering this phenomena in country after country is fascinating.  It is especially interesting how education bureaucrats are ignorant of what’s going on and always profess vehemently to him that there is no way this is happening in “their country.”  But yet it is…and providing better education (and sometimes cheaper once you figure in all the hidden fee for public schools).

I think this is an under-researched topic so I am happy to see a new working paper this morning by Bold, T.; Kimenyi, M.; Mwabu, G.; Sandefur, J. on private education in Kenya.  The title of the paper is The high return to low-cost private schooling in a developing country and here’s the abstract:

Can market solutions provide cost-effective alternatives to failing public service delivery systems in developing countries? Existing studies from the U.S., Latin America and Asia provide little evidence that private schools lead to large gains in academic performance relative to public schools. Using data from Kenya – a poor country with weak public institutions – we find a large effect of private schooling on test scores, equivalent to one full standard deviation. This finding is robust to endogenous sorting of more able pupils into private schools. The magnitude of the effect greatly exceeds the most cost-effective interventions to increase public school performance documented in the literature. Combining household survey and administrative data, we estimate median expenditure per pupil is just $41 per annum in the private sector, compared to $84 in government primary schools.


This time is different?

No no no, I’m not jumping on or off the Rogoff-Reinhart bus, I’m asking WB president Kim Jim to get some historical perspective on the Western Messianic Impulse.

Here’s Kim, 4/17/2013: For the first time ever, we have a real opportunity to end extreme poverty within a generation.


Here’s Harry Truman, 1/20/1949: “More than half the people of the world are living in conditions approaching misery. …For the first time in history, humanity possesses the knowledge and the skill to relieve the suffering of these people

Owen Barder provides a helpful compendium of these and other similar statements through the years.

The teachers push back

teachers_blockadeI recently created an online course on Mexican economic development for Marginal Revolution University. If you haven’t checked out MRU, I’d urge you to do so.  The courses are free and open to anyone.  MRU is the brainchild of Tyler Cowen and Alex Tabarrok, and here is their description of the concept.

The course is in the middle of unrolling on the site and in this week I have a several videos on Mexican education.  This is an important topic, for while enrollment and retention rates have improved, the average quality of schooling and teaching in Mexico is quite poor.

Mexico does not spend a lot on education and the money goes almost entirely to salaries: “of the federal budget spent on education, 97 percent goes to fund current (salary) costs.” The national Mexican teachers union (SNTE) has been politically very powerful and corrupt. Historically, people could buy teaching jobs, or sell their job, or bequeath it to a relative. Teachers are often not well trained, and the union has up to now resisted any competence testing with consequences. Life tenure is usually granted within 6 months of starting work.

President President Pena Nieto has made education reform one of the cornerstones of his presidency.  Already in 2013, the government has passed a reform bill that will:

“Create a system of uniform standards for teacher hiring and promotion based on merit, and will allow for the first census of Mexico’s education system. Because the 1.5 million-member National Union of Education Workers union controls the education system, no one knows exactly how many schools, teachers or students exist.”

The plan moves much of the control of the public education system to the federal government from the teachers’ union.

I say at the end of the video that the new bill is a good start, but real education reform will be a long hard road and the jury is still very much out.

A couple of recent articles (including one with the excellent title of “Those Who Can’t Teach Block” in the NY Times) reminded me of how long the road will likely be.

For instance, The Miami Herald reports that 20,000 public school teachers, who belong to “a radical splinter union of elementary and high-school teachers in Guerrero, one of the country’s poorest and worst-educated states,” went on strike more than a month ago.

A few days ago, thousands of members of this group blocked one of the busiest highways in the country for 2 hours, until the federal police “forcibly removed them.”

The fact that teachers are so mad might actually mean that the reform will make a difference.  Now we just have to wait and see if the politicians cave to the pressure.

Aid Eclipsed

Remittances are larger than official development assistance. According to this BBC piece, remittances in 2010 were $51.8 billion, while ODA was $43 billion. The author of the cited study argues that this inequality holds world-wide, saying that overall remittances are two and a half times greater than ODA ($350 billion vs. $150 billion).

Imagine how big remittances could be if rich country immigration policies were less miserly!


New historical development papers on my desk

1. Timothy Besley and Marta Reynal-Querol, “The Legacy of Historical Conflict Evidence from Africa

2. Miquel- Àngel Garcia-López; Adelheid Holl; Elisabet Viladecans-Marsal, “Suburbanization and highways: when the romans, the bourbons and the first cars still shape Spanish cities

3. Daniel M. Bernhofen,  El-Sahli , Zouheir, Kneller, Richard, “Estimating the Effects of the Container Revolution on World Trade

4. James Fenske, “Ecology, Trade and States in Pre-Colonial Africa

5. Leandro Prados de la Escosura, “World Human Development: 1870-2007

6. Alejandra Mizala and Hugo Nopo, “Evolution of Teachers’ Salaries in Latin America at the Turn of the 20th Century: How Much Are They (Under or Over) Paid?

The seen and the unseen

What accounts for a firm’s success or failure in exporting?

A new NBER working paper by Molina & Muendler investigates this question in a sample of Brazilian firms.

Here’s the abstract:

Exporters differ considerably in terms of export-market participation over time and employment size. But this marked diversity among exporters is not reflected in their workforce composition regarding commonly observed worker skills or occupations. Using Brazilian linked employer-employee data, we turn to a typically unknown worker characteristic: a worker’s prior experience at other exporters. We show that expected export status, predicted with current destination-country trade instruments, leads firms to prepare their workforce by hiring workers from other exporters. Hiring away exporter workers is associated with both a wider subsequent reach of destinations and a deeper market penetration at the poaching firm, but only with reduced market penetration at the firm losing the worker. This evidence is consistent with the hypothesis that expected export-market access exerts a labor demand shock, for which exporters actively prepare with selective hiring, and with the idea that a few key workers affect a firm’s competitive advantage.

In other words, workers in successful and unsuccessful export firms look alike on their observable characteristics, but there is a pool of exceptional workers, and the firms know who they are!

Great stuff!

If the link to the article provided above is gated or expired, an older version of the paper is available via Google Scholar.

Release the hounds…

Argentina has an unfortunate monetary history and an unfortunate way of repeating their monetary mistakes.  There are Argentine critics from the late 1800s bemoaning Argentina’s inflationary ways and the complaints sound like they could have been taken straight from the 1980s.

I teach Latin American Economic Development and Argentina is the gift that keeps on giving, still managing to surprise me every once in a while. For instance, I’ve been amazed (as have my students) at the stories about fines and prison time for economists that dare to publish alternative (read: accurate) inflation statistics.

Now, government restrictions on the holding of dollars has turned people’s demand for foreign exchange into a cat and mouse (and dog) game.


A WSJ article (gated, here is an ungated version) documents how Argentines looking to buy dollars must do so on the black market in transaction locations metaphorically called cuevas (or caves). The sellers of foreign exchange are called cavemen.

The government bans people from saving money in dollars and travelers are allowed very little foreign exchange for travel.  The author notes that, “Travelers must submit an online request to the national tax authority just days before leaving, and they usually receive approval for much less than they requested.”

Businesses that need to buy foreign imports must get the government’s permission to do so before being granted access to buy foreign currency at the official rate.

But of course, this just results in black markets and corruption.  The government has a strong weapon in their arsenal however, namely the dollar-sniffing dog.  My question is, do dollars smell different than pesos?  Are they especially stinky?  Is this all a ruse to cause people to think twice before smuggling dollars?  It all sounds pretty suspicious.

They just unveiled the 100 peso bill though with Evita’s portrait so I guess they have their economic priorities straight.


Politically Robust Randomization?

Gary King gave what looks to be a fascinating presentation on program evaluation in the context of Mexico’s  health care assistance program, Seguro Popular.

According to Gary, traditional randomization is not politically robust and he presents an alternative approach called Matched-Pair Randomization.

Here’s a couple of his slides to whet your appetite:



However you slice it though, from what I got out of the slides, the program so far is NOT improving health outcomes in Mexico.