Download Lecture 22

Economics 172
Issues in African Economic Development
Lecture 22
April 13, 2006
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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Kremer and Miguel (2004) on financial sustainability
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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
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(4) Water and sanitation
•
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
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Development in the international context
(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
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Cotton as a lens into international trade
•
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
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Cotton as a lens into international trade
•
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
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Map of Africa
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Cotton as a lens into international trade
•
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
Economics 172
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Cotton as a lens into international trade
•
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%
Economics 172
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Cotton as a lens into international trade
•
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
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Micro-evidence on cotton prices and poverty
•
Minot and Daniels (2002) use household data to
simulate what would happen to farmers in Benin if the
cotton price fell 10-20%.
Economics 172
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Micro-evidence on cotton prices and poverty
•
•
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%
Economics 172
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Micro-evidence on cotton prices and poverty
•
•
•
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
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Next topic: ethnic diversity and development
•
•
Sub-Saharan Africa is the world’s most ethnolinguistically diversity continent
14 of the world’s 15 most diverse countries are in
Africa (the one exception is India)
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Next topic: ethnic diversity and development
•
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Sub-Saharan Africa is the world’s most ethnolinguistically 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)
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Whiteboard #1
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Whiteboard #2
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Whiteboard #3
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Whiteboard #4
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Whiteboard #5
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Map of Africa
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