Social Spending and ethnic diversity

The core of a David Goodhart's "left-wing" argument against immigration is that racial diversity makes it harder to sustain high levels of social spending. 

I don't necessarily disagree with the point, but harder does not mean impossible. 

The argument is motivated by work by Alberto Alesina and other economists at Harvard. Alberto Alesina is a smart, original, and prolific thinker who does a lot of interesting work. But this particular paper, was never actually published in a peer-reviewed journal. The chart below is the main empirical result driving their argument (from this paper). 

As David is not an economist, I'll break this down for him slowly. This is called a "scatterplot". Social welfare spending as a percent of GDP is on the vertical axis, and an index of racial fractionalization is on the horizontal axis. You can see that there is a negative relationship between the two, but there is also a lot of variation around the fitted line.

A few observations:

- All of the European countries have relatively low levels of racial fractionalization - below 0.2 - but being European actually tells you very little about levels of social spending, which are spread widely between low spending Iceland and Greece, and high spending Belgium and Luxembourg. 

- Removing the European countries would remove the negative trend. Japan (almost no diversity) has almost exactly the same social spending as high diversity Brazil or US. Low diversity Costa Rica has the same social spending as high diversity Mauritius. 

- Looking at the UK - imagine that the UK began to approach New Zealand or US levels of diversity - does that mean we would have New Zealand levels of social spending (higher) or US levels of social spending (lower).

The key point from just looking at this chart is that even if there is a relationship, which it is not even clear that there really is if you consider Europe separately to the rest of the world, diversity is not destiny. Social spending is a policy choice. Diversity might influence this policy choice, but so do a lot of other things. Even if diversity did make social spending harder, it does not make it impossible. Correlation is not causation. Etc. QED. 

On giving up development

Nora Schenkel wrote a post mortem last week of her aborted development career 'I Came to Haiti to Do Good….'
I'm sorry we lost you Nora, and I hope that you change your mind. Though long hours hunched over a laptop fiddling with Excel might not always feel like it, working on the most important moral issue of our time, in whatever small way, is really a great privilege.

I sympathise with your guilt living a comfortable life amidst extreme poverty, and your frustration feeling that aid isn't making a positive difference. But your guilt is misplaced, and our frustration with ineffective aid should be a spur to do it better, not to just give up.

Your guilt is misplaced because almost all of us lucky enough to be born in wealthy countries have relatively comfortable lives. Even an average British salary puts you in the top one percent on the global rich list. The fact that in Britain we don't have to brush shoulders every day with extreme poverty does not make it cease to exist, and does not mean that morally we should feel any more or less than guilty than if we were living on the same salary in Haiti. That out of sight is out of mind is not moral reasoning.

Frustration with ineffective aid is exactly what is driving reform in the sector, towards more focus on measurement, results, transparency, and accountability. Yes there is still lots of improvement to be made, especially in difficult places to operate such as Haiti. But there can be no doubt that aid saves lives. And yes, in order for that to happen, some overheads are needed, including occasionally paying the salaries that it costs to hire skilled international staff, and for some of those air-conditioned offices and shiny white cars.

Extreme poverty is ugly. And it can seem uglier when it is contrasted so sharply with rich world largesse. But that contrast didn't cause the poverty, and running away from the problem doesn't make it better. It just means that you aren't forced to think about it every day.

Good luck Nora, I'm sure you'll do good.

"Poverty Barons"

From the independent review of DFID's use of consultants:

ICAI reviewed the DFID Central Procurement Group and a range of programmes with a combined contract value of £264 million. The case studies show that contractors are an effective option for delivering aid. DFID has selected contractors that have delivered positive results at competitive fee rates. DFID’s poor end-to-end programme management, however, has led to delays. In the case studies that we examined, this has had the greatest impact during the mobilisation phase and is exacerbated by a lack of ‘whole life’ individual responsibility for programmes. In addition, learning is not being captured from contractors or used to inform future programming. 

The reform of DFID’s central procurement group has improved processes but is too slow and lacks prioritisation. As a result, decisions to use contractors are not guided by a strategic plan to deploy the right contractors, including major, niche and innovative new entrant organisations, to best effect.

via TNL

Seeing like a State vs Seeing like a Donor

In which Justin Sandefur takes Chris Blattman and Bill Gates to school.... he argues that African governments don't need GDP data or internationally comparable micro survey data, they need good quality administrative data.

This, rather than the need for more duplicative household surveys, is the big challenge facing African statistics. Right now governments face a trade-off between high quality survey data of limited relevance, and low quality administrative data that actually fits their needs. It doesn’t have to be this way. But to overcome the trade-offs donors are going to have to back off with their pet survey projects, and stats bureaus across Africa will need to exert some renewed independence, and stop serving as research consultancies for donors.

Zing!

This TED talk will probably save someone's life

Are private school fees in India "inflated"?

Adventures in fact-checking exfam lefties

Swati Narayan on Duncan Green’s blog celebrates a new law passed in India reserving 25% of private school places for underprivileged kids. As part of the deal, the government reimburses private schools, but only at the level of government per pupil funding rather than necessarily the fees charged by private schools. Swati writes:

The Act is categorical that the state will reimburse private schools only based on what it spends per pupil in government schools, which is typically much less. For-profit private schools are therefore keen to pass on the burden and increase their already inflated fees for the remainder of the class.

Are those fees really inflated? It is possible that high-end elite schools are getting a raw deal here, but most private schools are not high-end elite schools. Here are some numbers from Karthik Muralidharan, who is possibly the global expert on the economics of education in India. In his survey of rural primary schools in Andra Pradesh, spending per pupil at government schools is typically five times more than at private schools.

Average spending per pupil at government schools: 7680 rupees ($140) per year

Average fees at private schools: 1330 rupees ($24) per year

Right then. I don't have a strong opinion about this new law, but let's maybe have less demonisation of private schools in poor countries where the public education system is pretty dysfunctional yeah?

PFM in Myanmar: do you have to choose between coordination and flexibility?

This is a guest post from Ben French (a policy adviser formerly based in Juba)

Following two short recent visits to Myanmar where I was looking at the Public Financial Management (PFM) and Planning aspects of Myanmar’s reforms, I kept encountering the same question: How to balance coordination between donors with the need for a rapid and flexible response to reform?

The PFM reform programme in Myanmar has strong government leadership and appears to be off to a good start. In line with best international practice, development partners, under the leadership of the World Bank, have taken the initiative to coordinate amongst themselves. This has been followed by the establishment of a donor-government PFM working group. Almost all donors interested in the sector have aligned behind this which is very much to the credit of both the government and the World Bank. The working group has been the locus for coordination of PFM activities with the recent PEFA (Public Expenditure and Financial Accountability Review) and the PER (Public Expenditure Review) to show for it. This coordination sets an impressive and important precedent for government leadership and donor cooperation in PFM. Moreover, it shows that the international community has been learning from experience and is prioritising planning and coordination (as discussed in this report by ODI).

At the same time, Myanmar is changing rapidly and has only 24 months to deliver on its reform agenda before the election period takes hold in the run up to 2015. Within this period there is a need to embed the government’s reform process into its day-to-day functioning, in order to limit backsliding and to strengthen the hand of reformers. Given this, a more immediate, direct and flexible package of support is essential and critical in direct contrast to a more measured approach focused on laying the foundation for future work through planning and studies.

As an observer looking in, there is considerable tension between the ongoing planning and coordination for future larger scale programming, and the immediate support needed by the government in order to prepare the ground. I wonder how to strike a balance between coordination and planning and a rapid, flexible response? Is it a zero-sum game between the two? A balance is clearly called for as running in too quickly without a coordinated, joint government-donor plan leads to poorly sequenced, uncoordinated reforms that are poorly understood at the national level. However, if those reforms aren’t supported right now they could die on the vine before any of the future planning gets a chance to take root.

In the context of Myanmar, and other countries with both immediate and longer term PFM needs (usually conflict-affected, post-conflict, fragile states as well as countries in political transition) it seems that the government and donors can become stuck in a cycle of ‘planning to plan’ at the expense of delivering a quick, flexible programme of support. Granted, immediate support will not resolve all issues but they do ‘soften the ground’ for the long term and are complimentary to that long term planning.

Obviously, context and circumstance are essential for determining the balance between the two. However, the balance must be considered and there are a number of ideas worth considering.

First, delivering quickly and rapidly builds trust between partners which is important in and of itself but is also critical for the success of any cooperation long term. The concept of building trust through short term support that supports basic skills and processes within government demonstrably achieves the objective of building relationships between various stakeholders – and not just at the senior policy level but down in the trenches where support for long term programmes is most critical. In other words, keep it simple stupid. Provide focused training and support to the current reform process with the aim of making the government an intelligent customer which is able to determine what it needs and wants from the range of options it will be presented.

Second, recognise that even if short-term support is limited it can be clearly and easily linked to future programme development and planning. Rapid implementation should not be allowed to evolve into full implementation but it can, and should, provide useful experience and information to inform the long-term full implementation. In practice this will mean that flexible, upfront, support will need to focus on basic training, simple implementation and refinements to systems and process (see some other interesting work from ODI here, and here).

This balancing act is starting to take place in Myanmar with the EU and JICA placing technical advisors in the Ministry of Planning who will build government capacity and understanding on how to effectively coordinate and engage with other government agencies and development partners across a range of sectors (health, education, electricity, etc.). This short-term approach will be implemented prior to and whilst a longer term plan takes shape, both meeting the government’s need for reform support and allowing the development partners to demonstrate rapid success.

And finally, a warning. Any short term, flexible support should be designed in such a way that it co-opts as many stakeholders as possible Short-term support parachuted in, acting in isolation, and with no tie to long-term goals undermines the balancing act. At minimum this should mean that the short term support is part of the coordination process and reports to all the actors involved in coordination. Various World Bank and regional development bank trust funds do this reasonably well when there are funds available.

These general observations should, by no means, detract from the on-going successes in coordination in countries such as Myanmar especially as these pockets of coordination are islands of sanity in a larger and more complex donor environment. Instead, this coordination should be fostered, incorporating both quick short-term support as well as long-term planning and research. Both are critical to confidence building between stakeholders, success of current reforms and PFM in the future. Finding, and striking, the right balance between planning and flexible support through good coordination is essential to long term positive outcomes.

On Immigration

I need to get some of this stuff out of my head to make some space in there for my actual day job. Since the clusterfuck David Goodhart book-copy-and-pastes op-eds started coming out a few weeks ago my head has been all fogged up with rage. Half of the frustration is simply how poorly he structures his arguments.

So here is some structure.

At the highest level there are two things to care about
1. The impact of policy (this is the utilitarian, consequentialist angle)
2. The Kantian ethics (what is a just process? we should care about the means as well as the ends)

Point 2, made repeatedly by Michael Clemens and others in the open borders camp, is that regardless of what the consequences of immigration are, individuals have rights, and states shouldn't be able to prevent people from leaving countries. As a Brit with some education, I have the right basically to live wherever I want. The same does not apply to smarter and harder working people than me who happen to be born in South Sudan, or most developing countries. In technical terms, this is called "fucked up."

Back to point 1 - there are three areas of concern
1.1 - The impact on the receiving community
1.2 - The impact on the migrant
1.3 - The impact on the sending community

Now, the strongest evidence is clearly on 1.2 - there are massive overwhelming positive impacts for the migrants themselves, who can increase incomes by orders of 1000% overnight.

The weakest evidence is on the other two points. There are reasons, theoretical and empirical, to think that immigration can have both positive and negative impacts on communities at large.

On 1.1 - perhaps the strongest evidence amongst the lot, is that the labour market impacts on receiving communities are not large (they did not took our job). There isn't a lot of evidence on the impact on public services and the like - though on average the foreign-born living in Britain are larger net contributors to public finances than the native born. So we are left with something vague about identity and community (more on this in another post).

On 1.3 - there is strong evidence of positive impact through remittances - remittances are substantially larger than foreign aid flows. There isn't much evidence of a brain drain, and actually evidence pointing the other way towards a "brain gain." Neither is there any evidence of a damaging impact on political reform. On the contrary, there are reasons to think that diaspora can help fund and influence reform movements more effectively from outside a country where they are not subject to political oppression. More from Claire Melamed here.

So to conclude, strong positive evidence of positive impacts for migrants and receivers of remittances, and then a bunch of weak vague stuff about community and governance. Add to that, the ethical or rights-based arguments.

And finally back to Goodhart, and his line that we should not care about people from Burundi more than people from Birmingham. But do we really need to care about them more to be in favour of immigration? From my reading of the evidence, I don't think that immigration does impose a net cost on Britain, but even being generous and assuming it did, I would weight that impact to be of the order of 1/10th of the positive impact to the migrant. Caring about people from Birmingham is fine, but the question is how much more should you care about them than someone from Burundi. I would image that there is some ratio at which Goodhart would support imposing a cost on a Brummie for a gain to a Burundian. What if we could make a Brummie worse off by £1 to increase the welfare of a Burundian by £10 billion? Or is it really never acceptable for British government policy to reduce the welfare of a British person by any amount, no matter how small, in order to increase a foreigner's welfare, no matter how large the gain? Not even for £10 billion? Martin Wolf does make the case for a zero weight, which is at least a coherent and explicit position on the issue, even if I do think it is abhorrent. Elsewhere, in a long and math-y blogpost YouNotSneaky estimated that for Mexican-US immigration, you have to value a Mexican at less than 1/20th of an American to be against immigration.

Do you care about foreigners less than locals? What's your number? Exactly how much less? Are foreigners half a local person? A tenth? A hundredth?

So what exactly just happened to the economy of South Sudan?

Some analysis from the Sudd Institute: (via John Ashworth)

Barely three months after the oil shutdown, the whole nation started to feel the resultant pinch of economic hardships. Salaries of civil servants were no longer coming regularly and the monthly allowances that used to cushion up the low salaries of the civil servants were discontinued. The dollar appreciated against the South Sudanese pounds and was in unprecedented shortage, forcing the market into an abrupt shock; prices rose; and the purchasing power weakened. As well, violent crimes increased, with armed robbery becoming the order of the day. News about common citizens and business people being shot dead injured, and/or robbed were making headlines on almost daily basis. In a sense, these consequences are attributable to the economic hardships facing the nation.

The political economy of Nigeria and Indonesia

A Nigerian and an Indonesian attend a foreign university together in the 1960s and become friends. After graduation, each returns home to join the government. Several years later, the Nigerian visits his colleague in Jakarta, and finds him living in a big, luxurious house with a Mercedes car parked outside. ‘How can you afford such a nice house on a politician's salary?', asks the Nigerian. ‘Do you see that road?', replies the Indonesian, pointing to a magnificent highway outside. ‘Ten per cent.' Some time later, the Indonesian goes to visit his Nigerian friend, and finds him living in a vast palace with ten Mercedes cars parked outside. Amazed, he asks where the money had come from. ‘Do you see that road?' asks the Nigerian, pointing to a thick tangle of rain forest. ‘A hundred per cent.'

From the Economist (old, but good)