Development

Rafael Dix-Carneiro, Pinelopi Goldberg, Costas Meghir, Gabriel Ulyssea, 05 March 2021

Shifts into and out of the informal sector are important margins of labour market adjustment to economic shocks, particularly in developing countries. This column develops a structural equilibrium model of trade and informality to study the effects of trade openness on unemployment, welfare, productivity, and wage inequality. Higher trade openness leads to strong positive effects on aggregate welfare and productivity, decreases in overall wage inequality, and moderate increases in unemployment. Modelling the informal and non-tradable sectors is crucial to reaching a comprehensive understanding of the effects of trade in developing countries.

Xinshen Diao, Mia Ellis, Margaret McMillan, Dani Rodrik, 01 March 2021

Before Covid-19 struck, many economies in sub-Saharan Africa were expanding rapidly – faster than at any time since independence. Yet African growth accelerations were anomalous when viewed from the perspective of comparative development patterns; structural changes were accompanied by declining within-sector productivity growth in modern sectors. This column explores this anomaly in the context of African manufacturing using newly created firm-level panel data for Tanzania and Ethiopia. In both countries, there is a sharp dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. These patterns appear to be related to technological advances in global manufacturing which are making it more capital intensive.

Simeon Djankov, Ugo Panizza, 23 February 2021

Africa’s citizens have so far mostly been spared the direct health consequences of the pandemic, but many of its economies are on life support. Ugo Panizza and Simeon Djankov, two of the editors of a new CEPR ebook about Africa's recovery, talk to Tim Phillips about post-Covid debt, FDI, food security, and how it's in all our interests to step up and help.
Download the free eBook, Shaping Africa’s Post-Covid Recovery, here.

Rabah Arezki, Simeon Djankov, Ugo Panizza, 23 February 2021

While most African countries have been largely spared so far from the direct health effect of the Covid-19 pandemic, the continent’s economy has been significantly hurt by the economic consequences. This is particularly concerning given Africa’s high prevalence of extreme poverty.  A new eBook from CEPR Press focuses on business and household responses to the Covid-19 crisis in Africa, as well as access to international finance, patterns in international borrowing, and country-specific experiences during the pandemic. 

Avinash Persaud, 23 February 2021

The switch to renewable energies is necessary for humanity’s future, but it is currently too slow. For developing countries, the critical obstacle is the pricing, ownership, land-use and approval processes renewable projects have to go through. This column argues that to bring dividends for sunnier, developing countries, provide more projects for green investors, and for some redemption for the rest of humanity, countries should (1) streamline the approval process, (2) broaden the ownership of assets through mandated initial public offerings and small-investor allocations while supporting big foreign investors in the short-run, and (3) offer an attractive feed-in tariff that predictably ratchets down in favour of consumers once investors reach their return threshold.

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