Development

Randolph Bruno, Nauro Campos, Saul Estrin, 25 May 2017

The economic effects of foreign direct investment are generally expected to be positive for the host economy. However, this is usually conditional on certain thresholds of development being met, for instance in terms of human capital or institutional quality. This column argues that the economic impact of foreign direct investment is less ‘conditional’ than commonly thought, perhaps because below the thresholds, the difference between private and social returns is substantial, while above them it is smaller.

Travers Child, 21 May 2017

The pervasive ‘hearts and minds’ theory guiding counterinsurgency doctrine contends that military-led reconstruction reduces violence in post-conflict settings. Using rare data from Afghanistan, this column questions the theoretical and empirical basis of that perspective. Military-led projects in the health sector are found to successfully alleviate violence, whereas those in the education sector actually provoke conflict. The destabilising effects of education projects are strongest in conservative areas, where public opinion polls suggest education projects breed antipathy towards international forces.

Rui Luo, 14 May 2017

While the impact of modern technological change on the skill premium has been well explained, there has been no study of the evolution of the skill premium over the very long run. This column reveals that the skill premium in Western Europe declined between 1300 and 1600, and converged to a low and stable level afterwards. Growth and technological change, while stimulating economic development and the transition from a pre-modern era to modern era, reduced wage inequality between different working groups.

Atish R. Ghosh, Jonathan D. Ostry, Mahvash S. Qureshi, 12 May 2017

There has been growing recognition that emerging markets may benefit from more proactive management of capital flows, and thus avoid crises when the flows recede. But do they do this in practice? By analysing policy responses in a sample of emerging markets, this column argues that central banks respond to capital inflows through various tools. Ironically, the most commonly prescribed instrument for coping with capital inflows – tighter fiscal policy – is the least-used tool in practice.

Ejaz Ghani, Arti Grover Goswami, Sari Pekkala Kerr, William Kerr, 06 May 2017

Developing countries around the world are implementing structural reforms and pro-competitive policies to promote growth, but the impact of this on gender equity is unclear. This column examines the case of India, one of the world’s fastest growing countries, and finds that gender equality has not improved. Policymakers must do more to eliminate gender discrimination. They have an opportunity to not only improve the allocative efficiency of factors and increase growth, but also create an environment of equal opportunity for all, by targeting domestic market competition. 

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