Asymmetric information, rent extraction and aid efficiency

Official Development Aid allows are volatile, non-predictable and not delivered in a transparent way. All these features reinforce asymmetric information between the citizens and the recipient government about the amount of aid flows received by developing countries. This article uses a political economy model of rent extraction to show how this asymmetry (i) encourages rent extraction by kleptocratic regimes, thus reducing aid efficiency, and (ii) increases the negative impact of aid volatility. It identifies a new channel - the "asymmetric information" channel - through which aid volatility is costly for recipient countries. The empirical relevance of the model is confirmed on a panel data of developing countries. Using various specifications and econometric methods, and developing new yearly estimates of aid volatility, I show that (i) introducing more information increases aid efficiency, that (ii) the negative impact of aid volatility on aid efficiency vanishes once one controls for information, and that (iii) this positive impact of information does not come from the fact that more transparent countries tend to have better institutions.foreign aid ; asymmetric information ; rent extraction ; volatility

Sex and the mission: the conflicting effects of early Christian missions on HIV in sub-Saharan Africa

This article investigates the long-term impact of historical missionary activity on HIV in sub-Saharan Africa. On the one hand, missionaries were the first to invest in modern medicine in the region. On the other hand, Christianity influenced sexual beliefs and behaviors that affect the risk of contagion. We build a new geocoded dataset locating Protestant and Catholic missions in the early 20th century, as well as the health facilities they invested in, that we combine with individual-level DHS data. With these data, we can address separately these two channels , within regions close to historical missionary settlements. First, we show that proximity to historical missionary health facilities decreases the likelihood of HIV; persistence in healthcare provision and safer sexual behaviors in the region explain this result. Second, we show that regions close to historical missionary settlements exhibit higher likelihood of HIV. This effect is driven by the Christian population in our sample. This suggests conversion to Christianity as a possible explanatory channel. Our findings are robust to alternative specifications addressing selection

The Long-Term Effects of the Printing Press in sub-Saharan Africa

This article investigates the long-term consequences of the printing press in the nineteenth century sub-Saharan Africa on social capital nowadays. Protestant missionaries were the first to import the printing press and to allow the indigenous population to use it. We build a new geocoded dataset locating Protestant missions in 1903. This dataset includes, for each mission station, the geographic location and its characteristics, as well as the printing-, educational-, and health-related investments undertaken by the mission. We show that, within regions close to missions, proximity to a printing press is associated with higher newspaper readership, trust, education, and political participation

« Pair à Pair » : les véritables enjeux économiques

Le « pair à pair » (P2P) est un système de distribution coopérative qui utilise des ressources distribuées pour accomplir des fonctions essentielles de manière décentralisée. Notre travail repose sur une synthèse de la littérature économique, d’une part, et sur l’analyse d’une base de données de réseaux P2P, d’autre part. La littérature économique s’est focalisée sur la coopération entre les pairs, mais par ailleurs les systèmes P2P permettent la mise en commun massive de ressources et d’informations à un coût et à une échelle auxquels il serait difficile de parvenir dans un système traditionnel de type client-serveur. C’est donc un enjeu économique majeur du P2P que de se positionner comme simple substitut aux systèmes client-serveur existants, ou au contraire comme outil pour créer une activité économique propre rendue possible par sa technologie. Le troisième enjeu est celui du business model du P2P qui se présente tantôt comme un nouveau système de partage « hors marché », ou un nouveau modèle d’affaire. À travers les caractéristiques économiques (de rivalité, d’exclusion, d’effet externe) et techniques (du degré de distribution), nous proposons une grille de lecture des différents cas de P2P.“Peer-to-Peer” (P2P) is a cooperative distribution system which uses distributed resources to perform critical functions in a decentralized manner. This paper reviews the economic literature and studies a qualitative database on P2P experiences. While the economic literature has focused so far on the issue of cooperation among peers and free riding, this article examines three major economic issues of P2P. P2P systems allow the massive pooling of resources and information at a cost and on a scale that would be difficult to achieve in a traditional client-server system. This is the first economic challenge: is the P2P system a mere substitute for client-server systems, or instead, does it create new economic activities made possible by this technology? The second economic issue of P2P is to understand peer cooperation and the stability of this cooperation. The third issue lies in the sustainability of its business model: is P2P just a new technology, a new sharing system, or a new business model? This paper constructs a typology for P2P experiences based on economic characteristics (rivalry, excludability, externalities) and technical characteristics (degree of decentralization)

Tax revenues and the fiscal cost of trade liberalization, 1792-2006

This article examines the impact of trade liberalization on government revenues. Using a new dataset on tax revenues for 130 countries between 1792 and 2006, we identify ninety-nine episodes of trade liberalization defined as a large fall in trade tax revenues not accompanied by a decrease in trade. Seven took place before World War One, seven in the interwar period, eighteen in the Bretton Woods period and the remainder after 1970. We examine the extent to which countries were able to recover the tax revenues lost by liberalizing trade by using other sources of revenue. We find that historical (pre-1970) trade liberalization episodes were unlikely to be accompanied by decreases in tax revenues, especially during the Bretton Woods era. In the recent period however, over 40% of the developing countries in our sample experience a fall in total tax revenues that lasts more than ten years after an episode of trade liberalization. Overall, trade liberalization led to larger and longer-lived declines in tax revenues in developing countries since 1970 than in today’s rich countries in the 19th and 20th centuries. Results are similar when we consider government expenditures, suggesting decreases in trade tax revenues negatively affect governments’ capacity to provide public services in many developing countries

Asymmetric Information, Rent Extraction and Aid Efficiency

Official Development Aid flows are volatile, non-predictable and, also, nontransparent. All these features give rise to asymmetric information about the amount of aid flows received by developing countries. This article uses a political economy model of rent extraction to show how this asymmetry (i) encourages rent extraction by kleptocratic regimes, thus reducing aid efficiency, and (ii) increases the negative impact of aid volatility. The empirical relevance of the model is confirmed on a yearly panel data on developing countries. Using various specifications and econometric methods, I develop new yearly estimates of aid volatility and aid efficiency. I show that introducing more information increases aid efficiency, which is robust to the use of different proxys for information. I also show that the negative impact of aid volatility on aid efficiency vanishes once one controls for information. These results, which confirm preliminary evidence by micro studies on public servants incentives, shed a new light on the aid efficiency debate

Growth, Poverty Reduction and Governance in Developing Countries: a Survey

According to the World Bank (World Bank, 2007), the aim of the Country Policy and Institutional Assessment (CPIA) is to assess “how conducive [a country’s policy and institutional] framework is to fostering poverty reduction, sustainable growth and the effective use of development assistance.” We review the most recent (since 2001) empirical and theoretical literature on the determinants of sustained growth, poverty reduction and the effective use of development assistance, distinguishing between policies/institutions versus outcomes, underlying the areas of agreement and discussing the current controversies. Drawing from this literature, we underline what are the current weaknesses of the CPIA. We emphasize especially the controversies on the association between the CPIA criteria and some determinants of sustained growth, poverty reduction and the effective use of development assistance. We then list the key determinants identified in the literature that have been left out by the CPIA. Finally, after reviewing the literature, we conclude that, concerning the determinants of sustainable growth as well as poverty reduction and the effective use of development assistance, one of the most important points made in the literature is that “there is not universal recipe” (Barder and Birdsall, 2006). As a consequence, one of the main criticisms against the CPIA is that it “relies too heavily on a uniform model of what works in development policy” (Kanbur, 2005b).