Trade liberalization can generate substantial distributional conflicts. This paper measures the impact of increasing trade openness between Mexico and the U.S. resulting from NAFTA on the income of small versus large cash-crop farmers in Mexico. Benefits resulting from higher prices of export goods as well as losses incurred from greater import competition are considered. First, relating NAFTA cuts in trade restrictions to border prices of Mexican exports and imports, I find that NAFTA-induced tariff reductions decreased the border price of corn, Mexico’s main agricultural import, and increased the border prices of tomatoes and melons, Mexico’s main agricultural exports. Then, I find that, among cash-crop farmers, the rise in fruit and vegetable prices benefited small farmers more than large farmers; while the drop in corn prices hurt large farmers more than small. Finally, the analysis at the regional level shows stronger results in the central region where trade liberalization increased the level of earning of poor farmers relative to those of large farmers. These results are consistent with observed cropping patterns and regional characteristics.
The World Bank recently announced that it would no longer provide funding for coal plants, except under extraordinary circumstances (basically for very poor countries with no other options). This comes after the announcement last month by the US government that it would no longer be funding coal plants internationally. I’m surprised first that the WB would time their decision so close to the Obama administration’s. That should certainly (and correctly) provide more evidence for the argument that the US essentially runs the bank.
I don’t have any problem if the bank no longer wants to fund coal plants, but what concerns me is that the reason they give. They will instead finance “will focus on scaling up cleaner natural gas and hydroelectric dams in order to deliver electricity to hundreds of millions of people around the world who still don’t have it.” I’m all for reducing carbon emissions and helping the environment, but I wonder if the developing countries see this in the same light.
Amazingly, the new World Bank president, Jim Yong Kim, stated that the “world’s top priority must be to get finance flowing and get prices right on all aspects of energy costs to support low-carbon growth.” I’m surprised that as WB president that is what he thinks the world’s “top priority” is.
He does back off some though when discussing the possibility of funding a coal plant in Kosovo: “Climate change and the coal issue is one thing,” he said in April, “but the humanitarian issue is another, and we cannot turn our backs on the people of Kosovo who face freezing to death if we don’t move in.”
The New York Times, in A River Runs Over With It, documents how bad sewage treatment is in Brazil. A 1992 UN conference on the environment in Rio caused the Brazilian government to promise big changes when it came to water treatment. Unfortunately, “after 20 years and more than $1.17 billion in investments from international agencies and the state government, not one of the four treatment stations that were built to process sewage is fully operational.”
The situation is now so bad that less than 55% of Brazilian households have treated water. So what is an eager to please government to do? More promises of course. This time they promise to spend $720 million to improve water treatment in Greater Rio, an area where currently “only half of the wastewater is collected and only 4 percent of that is treated.” Another $580 million has been slated for water treatment plants and sewer lines for 16 other cities.
This reminds me of the sad tale of Ghanaian investment at the start of one of my favorite development books: The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. My students are often dumbfounded by the idea that big investments like this might not work out and I think they sometimes like to think that the Ghanaian case as atypical, that perhaps Easterly has cherry-picked an extreme example to get their attention. As the Brazilian example shows though, it isn’t that uncommon. I’m hoping these next promises will work out better.
Fellow GMU graduate Mwangi Kimenyi has an interesting piece (co-written with David Muthaka) on the creation of the Bangla-pesa, a voucher currency used in a slum called Bangladesh in Mombasa. The currency is called the Bangla-Pesa (pesa is the word for money in Swahili) and the vouchers are really beautiful. Here is one example:
For other denominations, click here.
The idea behind the voucher currency is to help residents, who often face a lot of income volatility, essentially smooth consumption. The authors give a description of how it works:
“Businesses that are members of the Bangla Business Network enroll in the program, which distributes an equal number of vouchers to each member. In addition, all the members agree to honor the vouchers as means of exchange. Now when all or some of the traders experience downturns in their business, they can make business transactions among themselves with Bangla-Pesa. Given that the bicycle operator needs to purchase some groceries, he will give the grocer BPs (amount depending on quantity of groceries). The grocer accepts the BP vouchers and gives him the groceries he needs. When the grocer needs to get somewhere via bike, she can go to the bicycle operator (who is also a member of the Bangla Business Network) and take a ride using her BPs. The transactions do not have to take place simultaneously. This is not a barter trade system because the vouchers are used to make transactions for many goods and services among all members of the business network. As a result, the traders in this slum are able to engage in a whole range of transactions using Bangla-Pesa.
Initial results show that Bangla-Pesa is making a real difference in members’ lives. A survey showed that 83% of the members reported an increase in sales due to the vouchers, while only .05% report lower sales. The vouchers make up a good amount of the transactions these participants make, about 22% of daily sales.
The authors note that these types of programs can increase community participation and spirit, although they raise some interesting questions to consider before recommending widespread adoption of vouchers: Could such use of a localized currency weaken linkages with other communities and the larger economy? What might be the impact on the economy if many other slums in country or city adopt their own complementary currencies? Is this a program that should be restricted or regulated? Is it a case of “bad money” driving “good money” out?
Fore more information on Bangla-pesa, click here.
I wrote yesterday about exciting educational reform in India and the UK (Grannies in the Cloud). Recent news from San Jose State University make it clear that online education is still a work in progress.
Earlier this year, SJSU teamed up with Udacity to offer remedial math and stats courses to anyone could paid $150. They have since suspended the experiment after the fail rates were off the charts. About 85% of the students that signed up actually completed the class, which is a high number, but the pass rates only ranged from 20-44%. Apparently about 75% usually pass the same courses in a non-online setting.
Forbes has a good article detailing some of the reasons that the program might not have worked so well. Ironically, the title of the piece is “Failing Fast,” which I assumed to be (cruelly) referring to the students who failed the course but actually refers to Udacity.
I’m glad that the university is going to work with Udacity to rethink the program and try again in 2014. A lot of the trouble with the courses seemed to stem from the fact that they were put together in a rush without adequate thought and preparation.
It’s fascinating to see how technology is changing education. It’s not clear which forms will pan out, but it’s fun to see what people are coming up with to expand education.
Recently I read about Sugata Mitra’s new idea for education in the clouds. Mitra is a Professor of Educational Technology at Newcastle University and he is most well known for his “Hole in the Wall” experiment in 1999. In the experiment, he installed a “child-height computer in the wall of a Delhi slum. Children worked out its functions for themselves, leading to Professor Mitra’s idea of a self-organised learning environment, or Sole.”
Now he is building on that idea by forming cloud schools with an army of “grannies”. Using the $1 million dollars he won from TED 2013, he is working on the creation of 7 schools, 5 of which will be in India and 2 in the UK. The idea is mostly geared to remote schools in poorer countries, where students may not have teachers, much less access to computers. Mitra also wanted to experiment with a couple of good schools as well, however, to see if cloud schooling could make a difference there.
So what is the role of the grannies? Mostly they are retired schoolteachers who will “suggest research topics to children and encourage and praise their learning, without actually teaching them. Professor Mitra hopes that the grannies will be able to supervise everything in the cloud schools remotely, including physical features such as lights and windows.”
There will be seven schools to begin with. Here is the rundown:
Area 0: the flagship, most expensive, cloud school. A hexagonal glass pod to be built in Gocharan, a village in West Bengal, India.
Area 1: the most remote cloud school, to be built from mud and grass in Korakati, a tiny village in the Sundarbans mangrove swamps in the Ganges Delta, West Bengal.
Area 2: in an existing room in the village of Chandra Koma, around 200km from Calcutta.
Area 3: in a yet to be identified urban slum in Delhi, India.
Area 4: in a yet to be identified urban slum in Pune, India.
Area 5: in a converted classroom at George Stephenson High, Killingworth, England.
Area 6: in an arts centre at Greenfield Community College, Newton Aycliffe, England.
The one thing that I found a bit freaky is that each area will have a large screen where a “life-size image of a supervising “granny” will be projected.” I’d find that a bit weird if I were a student and a bit awkward if I were the granny.
Of all the interesting articles out there about the capture of the Zeta cartel boss and what it means for Mexico’s drug war, this headline takes the cake on least insightful and most obvious:
Wow, I’m shocked. That’s some hard-hitting journalism. I would have never guessed.