economics 172 issues in african economic development lecture 22 april 13, 2006
TRANSCRIPT
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Economics 172Issues in African Economic Development
Lecture 22
April 13, 2006
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Economics 172 2
Outline:
(1) Kremer and Miguel (2004)
(2) Cotton and international trade in Africa*
(3) Ethnic diversity and African development (Laitin 1992)
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Economics 172 3
• The structure of foreign aid programs is also important• There has recently been a strong push towards
“financial sustainability” in local development projects, and against continued subsidies for drugs:
– Cost recovery from beneficiaries– Health education– Local “ownership” of projects
• Contrast with standard public finance approach that advocates ongoing subsidies to overcome externalities
Kremer and Miguel (2004) on financial sustainability
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Economics 172 4
• Observational (non-experimental) estimates – Wells have no effect on worm infection– Latrine ownership reduces worm infection
• But latrine costs quite high– $130.20 per child-year of infection averted– Drug subsidies are more than 100 times more
effective in terms of reducing infections
(4) Water and sanitation
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Economics 172 5
(1) Foreign aid and development (Easterly 2001)(2) Debt and development (Leonard and Strauss 2003)(3) The design of development projects financed by aid
(Kremer and Miguel 2004)
(4) International trade and development – the case of cotton in Africa
Development in the international context
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Economics 172 6
• Many people have extremely strong views about either the positive or negative impacts of international trade on economic development
• Opponents of the current world trade regime have pointed to the case of cotton
Cotton as a lens into international trade
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Economics 172 7
• Tens of millions of Africans (in Benin, Burkina Faso, Chad, Tanzania, etc.) rely on cotton as a cash crop, but the world market is distorted by US$4 billion annual subsidies by the U.S. government
Cotton as a lens into international trade
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Economics 172 8
Map of Africa
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Economics 172 9
• Tens of millions of Africans (in Benin, Burkina Faso, Chad, Tanzania, etc.) rely on cotton as a cash crop, but the world market is distorted by US$4 billion annual subsidies by the U.S. government
– World price US$0.42, US farmers received US$0.72
Cotton as a lens into international trade
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Economics 172 10
• Tens of millions of Africans (in Benin, Burkina Faso, Chad, Tanzania, etc.) rely on cotton as a cash crop, but the world market is distorted by US$4 billion annual subsidies by the U.S. government
– World price US$0.42, US farmers received US$0.72– Three times annual USAID assistance to Africa– This leads the world market price to drop, perhaps
by 10-20%
Cotton as a lens into international trade
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Economics 172 11
• Tens of millions of Africans (in Benin, Burkina Faso, Chad, Tanzania, etc.) rely on cotton as a cash crop, but the world market is distorted by US$4 billion annual subsidies by the U.S. government
– World price US$0.42, US farmers received US$0.72– Three times annual USAID assistance to Africa– This leads the world market price to drop, perhaps
by 10-20%– Brazil has won two rounds of legal battles against
the US in the WTO
Cotton as a lens into international trade
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Economics 172 12
• Minot and Daniels (2002) use household data to simulate what would happen to farmers in Benin if the cotton price fell 10-20%.
Micro-evidence on cotton prices and poverty
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Economics 172 13
• Minot and Daniels (2002) use household data to simulate what would happen to farmers in Benin if the cotton price fell 10-20%.
• They estimate that national poverty would increase 7%
Micro-evidence on cotton prices and poverty
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Economics 172 14
• Minot and Daniels (2002) use household data to simulate what would happen to farmers in Benin if the cotton price fell 10-20%.
• They estimate that national poverty would increase 7%
• Meatu district in Tanzania is another cotton growing region. Farmers and the owners of the local cotton ginnery are hard hit when cotton prices fall, as they have since the mid-1990s
Micro-evidence on cotton prices and poverty
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Economics 172 15
• Sub-Saharan Africa is the world’s most ethno-linguistically diversity continent
• 14 of the world’s 15 most diverse countries are in Africa (the one exception is India)
Next topic: ethnic diversity and development
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Economics 172 16
• Sub-Saharan Africa is the world’s most ethno-linguistically diversity continent
• 14 of the world’s 15 most diverse countries are in Africa (the one exception is India)
• What language should be chosen as the national language of such diverse countries? (Laitin 1992)
Next topic: ethnic diversity and development
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Economics 172 17
Whiteboard #1
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Economics 172 18
Whiteboard #2
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Economics 172 19
Whiteboard #3
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Economics 172 20
Whiteboard #4
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Economics 172 21
Whiteboard #5
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Economics 172 22
Map of Africa