An article in the Economist has highlighted that the middle-class of Africa is growing too slowly. Although the continent has been experiencing continuous GDP growth, the growth has not been inclusive, leading to an increase in inequality. The continent is too reliant on natural resources, so any changes in the global price of resources can be a boon or bane for the continent.
African countries can pool their resources together to achieve shared prosperity. Some of the things they could do are:
1. open an interdisciplinary research university with branches across the continent where students and researchers can work to solve Africa's problems. The universities can be modeled after the Indian Institute of Technology of India. These universities can help to generate technology solving Africa's problems, in addition to creating a pool of labor with adequate human capital
2. take steps to increase trade between countries, and make it easier for firms and people to open businesses across Africa. This will cushion African countries from negative external economic shocks.
3. encourage FDI in manufacturing sectors like footwear and garments, and link cotton producers to those manufacturing sectors.
4. improve the transnational infrastructure and ports.
These would help to increase manufacturing activities, and create a pool of people who can move to the middle-class category. Once the trajectory is set, the size of the middle class will increase substantially. This can help the continent as a whole to prosper.
Monday, October 26, 2015
Thursday, October 22, 2015
Interactive Maps/Infographics
There is a lot of websites that provide interactive visual of data. Some of them are listed below:
US Data:
US Data:
... more will be added as I find them online.
Tuesday, October 20, 2015
US Short Term Energy Outlook of EIA
The Energy Information Administration (EIA) of the US government released the Short Term Energy and Winter Fuels Outlook on October, 2015. The report predicts that the demand for gasoline will continue to increase till the end of 2016 because of strong performance of the US economy and the continued fall in unemployment rates. However, US crude oil production has been falling in recent months, and will continue to fall till mid-2016, according to the report. This is mainly due to the excess supply of crude oil in the world at present.
These factors, along with the low price of oil, will have some impact on employment in the crude oil extraction sector. Besides, energy from renewable sources continues to rise. About 10 percent of the energy in the US is derived from renewable sources, and it is expected that most of the energy will from from renewable sources by 2040. Thus, even though the economy is performing relatively well, and unemployment rates are low, the crude oil sector may see job losses in the coming months, States that are relatively more dependent on the crude oil extraction industry may experience some negative effects on the economy, although in general, the nation as a whole is performing well.
These factors, along with the low price of oil, will have some impact on employment in the crude oil extraction sector. Besides, energy from renewable sources continues to rise. About 10 percent of the energy in the US is derived from renewable sources, and it is expected that most of the energy will from from renewable sources by 2040. Thus, even though the economy is performing relatively well, and unemployment rates are low, the crude oil sector may see job losses in the coming months, States that are relatively more dependent on the crude oil extraction industry may experience some negative effects on the economy, although in general, the nation as a whole is performing well.
Tuesday, October 13, 2015
Human Opportunity Index of the World Bank
In 2010, the World Bank released a report on the Human Opportunity Index (HOI) for Latin American and Caribbean countries. The HOI is different from measures of poverty in that it does not measure deprivation of a commodity by people in a community; instead, it measures the level of access of a certain basic service by the members in a community.
Some basic services that we believe should be available to all are (but not exhaustive) are: (i) access to primary and secondary education; (ii) access to healthcare; (iii) access to clean water; (iv) access to public transportation; and (v) access to government offices. However, it may be that some of these services are not available to all the members of a region or a country, mainly because of certain individual or regional characteristics. For example, in some countries, females are not allowed to go to schools by their families even though the government may encourage universal education because the school is too far away from home, or for other reasons. Thus, the HOI measures the level of access of a basic service (access to education in this case) available to all the children in a region or a county.
The HOI is measured in the following way:
Suppose there are N children in a country. Suppose that a proportion of p of children in a country have access to a basic service, like primary education. These children have different characteristics, based on their gender, region of residence, whether the head is male of female, or wealth of household. Therefore, a male child of a poor family headed by a female in region x will have a different level of access to education than a female child of a rich family living in region y. If there are 2 genders, R regions in a country, male or female head of a family, and 3 different wealth levels (rich, middle class, poor), then there will be a total of 2 x R x 2 x 3 = 12R different characteristics. Let x = {1, 2, ..... 12R} denote each of the characteristics. More characteristics can be added to the mix if needed.
Across the country, as said before, suppose p is the proportion of children who have access to education. Let p(x) be the probability that children with characteristics x have access to that service. If p(x)<p then that group is disadvantaged, because they are worse than the average of the nation, and if p(x)>p then the group is advantaged because it have more access than the average population. If V is the disadvantaged group, then the Human Opportunity Index is:
HOI = p - E(p - p(x) | x is in V)
The term E(p - p(x) | x is in V) is computed as follows: it is the average of the difference of p and p(x) of all the characteristics that are disadvantaged. This value is then subtracted from p to calculate the HOI.
HOI is a number between 0 and 1. The closer it is to 1 the more there is access of a basic service by all who deserve it. HOI can be calculated of each of the basic service that is available to the citizens of a country. If the HOI of a service is low, governments should work to improve the access of that service, and not just provide it.
Some basic services that we believe should be available to all are (but not exhaustive) are: (i) access to primary and secondary education; (ii) access to healthcare; (iii) access to clean water; (iv) access to public transportation; and (v) access to government offices. However, it may be that some of these services are not available to all the members of a region or a country, mainly because of certain individual or regional characteristics. For example, in some countries, females are not allowed to go to schools by their families even though the government may encourage universal education because the school is too far away from home, or for other reasons. Thus, the HOI measures the level of access of a basic service (access to education in this case) available to all the children in a region or a county.
The HOI is measured in the following way:
Suppose there are N children in a country. Suppose that a proportion of p of children in a country have access to a basic service, like primary education. These children have different characteristics, based on their gender, region of residence, whether the head is male of female, or wealth of household. Therefore, a male child of a poor family headed by a female in region x will have a different level of access to education than a female child of a rich family living in region y. If there are 2 genders, R regions in a country, male or female head of a family, and 3 different wealth levels (rich, middle class, poor), then there will be a total of 2 x R x 2 x 3 = 12R different characteristics. Let x = {1, 2, ..... 12R} denote each of the characteristics. More characteristics can be added to the mix if needed.
Across the country, as said before, suppose p is the proportion of children who have access to education. Let p(x) be the probability that children with characteristics x have access to that service. If p(x)<p then that group is disadvantaged, because they are worse than the average of the nation, and if p(x)>p then the group is advantaged because it have more access than the average population. If V is the disadvantaged group, then the Human Opportunity Index is:
HOI = p - E(p - p(x) | x is in V)
The term E(p - p(x) | x is in V) is computed as follows: it is the average of the difference of p and p(x) of all the characteristics that are disadvantaged. This value is then subtracted from p to calculate the HOI.
HOI is a number between 0 and 1. The closer it is to 1 the more there is access of a basic service by all who deserve it. HOI can be calculated of each of the basic service that is available to the citizens of a country. If the HOI of a service is low, governments should work to improve the access of that service, and not just provide it.
Tuesday, October 6, 2015
Sustainable Development Goals
The United Nations recently released a set of goals to be met by 2030. Named the "Sustainable Development Goals," there are 17 targets that together, would improve the overall quality of life of each and every citizen of the world. The broad goals are:
1. Eliminate extreme poverty - that is, no one in the world will live on less than $1.25/day
2. Eliminate hunger from this world, and improve food security
3. Enable people to lead a healthy life
4. Provide quality education to all
5. Promote gender equality, and female empowerment
6. Promote a sustainable management of water resources and sanitation
7. Provide energy to all
8. Ensure sustainable and inclusive economic growth
9. Create sound infrastructure that allows for industrialization
10. Reduce the level of inequality between and inside countries
11. Improve quality of life in cities
12. Promote sustainable production and consumption of resources
13. Tackle climate change
14. Promote conservation in oceans
15. Promote sustainable land use
16. Develop societies that are peaceful and inclusive
17. Ensure countries work together to achieve sustainable goals.
These are without doubt, very ambitious targets. These goals imply that just raising incomes will not bring prosperity among others. So, other indices of well-being must be measured besides income. Besides implementing these goals, policymakers should establish proper measurement techniques to track the progress of each goal.
These indices can be used to effectively measure the progress of these goals:
1. the multidimensional poverty index (MPI) can be used to create one index that can aggregate the progress of different dimensions of deprivation, such as income, hunger, clean water,
2. the multidimensional human opportunity index can be used to track the level of access of different services, like access to energy, schools, hospitals and other public institutions.
3. The elasticity of growth measures can be used to see if there is inclusive growth in countries
4. Measuring air, water, and land quality should determine how effectively we are conserving the environment.
Tracking the progress periodically can help policymakers gauge where they are and what they need to do to improve the lives of people. Thus, besides spending money on meeting these goals, governments and development partners should spend considerable amount of money on data collection and progress reports.
1. Eliminate extreme poverty - that is, no one in the world will live on less than $1.25/day
2. Eliminate hunger from this world, and improve food security
3. Enable people to lead a healthy life
4. Provide quality education to all
5. Promote gender equality, and female empowerment
6. Promote a sustainable management of water resources and sanitation
7. Provide energy to all
8. Ensure sustainable and inclusive economic growth
9. Create sound infrastructure that allows for industrialization
10. Reduce the level of inequality between and inside countries
11. Improve quality of life in cities
12. Promote sustainable production and consumption of resources
13. Tackle climate change
14. Promote conservation in oceans
15. Promote sustainable land use
16. Develop societies that are peaceful and inclusive
17. Ensure countries work together to achieve sustainable goals.
These are without doubt, very ambitious targets. These goals imply that just raising incomes will not bring prosperity among others. So, other indices of well-being must be measured besides income. Besides implementing these goals, policymakers should establish proper measurement techniques to track the progress of each goal.
These indices can be used to effectively measure the progress of these goals:
1. the multidimensional poverty index (MPI) can be used to create one index that can aggregate the progress of different dimensions of deprivation, such as income, hunger, clean water,
2. the multidimensional human opportunity index can be used to track the level of access of different services, like access to energy, schools, hospitals and other public institutions.
3. The elasticity of growth measures can be used to see if there is inclusive growth in countries
4. Measuring air, water, and land quality should determine how effectively we are conserving the environment.
Tracking the progress periodically can help policymakers gauge where they are and what they need to do to improve the lives of people. Thus, besides spending money on meeting these goals, governments and development partners should spend considerable amount of money on data collection and progress reports.
Thursday, October 1, 2015
SMEs and Economic Growth
A Small and Medium Enterprise (SME) has different definition, based on which organization is defining it. The World Bank defines an SME as a business enterprise employing less than 300 workers, with an annual turnover and assets of less than $15 million each. The African Development Bank, on the other hand, defines SME as a business entity with less than 50 workers. Norway defines SME as an organization with less than 100 workers, while Vietnam defines it as one with less than 300 workers.
Small and Medium Enterprises (SMEs) provide an important avenue for job creation in any country - developed or developing. For example, in OECD countries, about 60 to 70 percent of all workers work in SMEs, showing that most workers are not employed in public sector or in large enterprises. There is an important link between SMEs and economic growth. Cross-country analysis has shown that growth in SMEs can positively increase economic growth. An analysis from India also shows the positive link between SME growth and GDP growth. A recent World Bank study has shown that giving funds randomly to small businesses in developing countries can increase their size, which can eventually help to improve job prospects and development of poorer countries.
Not surprisingly, a better business environment positively contributes to the growth of SME. However, SMEs face impediments to grow, because of financial constraints. An SME might find it harder than a large firm to raise capital for expansion. Although commercial banks find lending to SMEs as profitable entities to loan funds, much of their loan portfolio is dedicated to larger firms. Developing countries should therefore ensure that they have favorable business policies and ease of raising capital for SMEs. Besides attracting large scale FDI (which may, or may not have the desired economic effect), governments should promote the development of the SMEs. This can help to generate employment, raise incomes and enhance economic growth in the long run.
Small and Medium Enterprises (SMEs) provide an important avenue for job creation in any country - developed or developing. For example, in OECD countries, about 60 to 70 percent of all workers work in SMEs, showing that most workers are not employed in public sector or in large enterprises. There is an important link between SMEs and economic growth. Cross-country analysis has shown that growth in SMEs can positively increase economic growth. An analysis from India also shows the positive link between SME growth and GDP growth. A recent World Bank study has shown that giving funds randomly to small businesses in developing countries can increase their size, which can eventually help to improve job prospects and development of poorer countries.
Not surprisingly, a better business environment positively contributes to the growth of SME. However, SMEs face impediments to grow, because of financial constraints. An SME might find it harder than a large firm to raise capital for expansion. Although commercial banks find lending to SMEs as profitable entities to loan funds, much of their loan portfolio is dedicated to larger firms. Developing countries should therefore ensure that they have favorable business policies and ease of raising capital for SMEs. Besides attracting large scale FDI (which may, or may not have the desired economic effect), governments should promote the development of the SMEs. This can help to generate employment, raise incomes and enhance economic growth in the long run.
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