Social policy and macroeconomics : the Irish experience

The remarkable performance of the Irish economy in recent years has attracted much attention. Within a 10-year period the economy went from an 18 percent unemployment rate to nearly full employment, while the ratio of debt to GDP fell from 120 percent to less than 50 percent. Inevitably, this success was also accompanied by problems, as infrastructure came under increasing stress, environmental difficulties became more evident, and a changing social structure resulted in some groups becoming increasingly marginalized. What worked and what did not? In particular, are there lessons that may be relevant for other countries facing similar difficulties, especially in Asia and Latin America? McCarthy focuses on three features of Ireland's economic achievements. Two of these features are external: the opening to Europe and the role of foreign direct investment. The third and perhaps most"exportable"feature is domestic: the role of a social pact. This pact was initially between employers, trade unions, and the government. Subsequent pacts were extended to include a variety of other groups. McCarthy discusses the far-reaching impact of this series of pacts on health, poverty, employment, education, and social welfare. Ireland now faces a number of challenges, including the slowdown in the global economy, a fall in resource transfers from the European Union, and the potential effects of the entry into the EU of Hungary and Poland.Economic Theory&Research,Environmental Economics&Policies,Public Health Promotion,Health Monitoring&Evaluation,Labor Policies,Economic Theory&Research,Environmental Economics&Policies,Health Monitoring&Evaluation,Poverty Assessment,National Governance

Multi-level Monte Carlo for continuous time Markov chains, with applications in biochemical kinetics

We show how to extend a recently proposed multi-level Monte Carlo approach to the continuous time Markov chain setting, thereby greatly lowering the computational complexity needed to compute expected values of functions of the state of the system to a specified accuracy. The extension is non-trivial, exploiting a coupling of the requisite processes that is easy to simulate while providing a small variance for the estimator. Further, and in a stark departure from other implementations of multi-level Monte Carlo, we show how to produce an unbiased estimator that is significantly less computationally expensive than the usual unbiased estimator arising from exact algorithms in conjunction with crude Monte Carlo. We thereby dramatically improve, in a quantifiable manner, the basic computational complexity of current approaches that have many names and variants across the scientific literature, including the Bortz-Kalos-Lebowitz algorithm, discrete event simulation, dynamic Monte Carlo, kinetic Monte Carlo, the n-fold way, the next reaction method,the residence-time algorithm, the stochastic simulation algorithm, Gillespie's algorithm, and tau-leaping. The new algorithm applies generically, but we also give an example where the coupling idea alone, even without a multi-level discretization, can be used to improve efficiency by exploiting system structure. Stochastically modeled chemical reaction networks provide a very important application for this work. Hence, we use this context for our notation, terminology, natural scalings, and computational examples.Comment: Improved description of the constants in statement of Theorem

Comparative life expectancy in Africa

For health outcomes, is poverty destiny? The authors explore this question for life expectancy in Africa, where health outcomes are positively correlated with income, but where the link is far from uniform. The key variables associated with good health outcomes (controlling for health expenditures) are access rates - to health services, to clean water and sanitation, and to education, particularly for women. Health expenditure, either as percentage of GNP or per capita, is not a good predictor of health outcomes (endogeneity aside). The tenuous link among health expenditures, health service outputs, and health outcomes suggests marked differences in the mapping from spending to services and from services to outcomes. While few conclusions can be drawn on theaggregate level, the patterns raise questions about what share of public expenditure should be devoted to preventive as opposed to curative measures, and the relative importance of sanitation infrastructure versus traditional health care.Health Systems Development&Reform,Public Health Promotion,Health Economics&Finance,Health Monitoring&Evaluation,Early Child and Children's Health,Health Economics&Finance,Health Monitoring&Evaluation,Inequality,Health Systems Development&Reform,Environmental Economics&Policies

Economic shocks and the global environment

Policy formulation in most countries is complicated by the role of the external economic environment, especially during periods of great external shocks. The authors examine how individual countries were affected by, and responded to, external shocks. They apply an enhanced version of an earlier methodology for estimating the effect of three kinds of shock: terms of trade, variations in global demand, and changes in the interest rate. They discuss the magnitude of these shocks and country responses to them in Brazil, Ireland, and Korea and present numerical results for some other countries. The authors find that the magnitude of external shocks may be greater than previously recognized. The size and components of the shock depend on such factors as the country's openness to trade, the composition of its imports and exports, and its level of external debt. The authors also found that countries differ greatly in their responses to external shocks. Some rely on additional external financing, some place more emphasis on export promotion, and others favor import substitution. The authors conclude that the magnitude and composition of external shocks should be part of any explanation of why growth rates differ among countries.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Achieving Shared Growth

Economic performance in small open economies : the Caribbean experience, 1980-1992

The authors study the economic performance of ten Caribbean islands in two groups: six small islands from the Organization of Eastern Caribbean States (OECS) and four larger islands: Barbados, Dominican Republic, Jamaica, and Trinidad and Tobago. They compute external shocks together with each island's performance response to them. Some islands resorted inordinately to external financing to cope with adverse shocks. Others tried to compensate by stimulating exports and tourism. The buildup of debt created problems for some of the governments later in the decade, resulting in the need for strong contractionary measures. But the difference in performance between islands cannot be explained by external shocks alone. The OECS group achieved superior performance even though they faced roughly the same shocks as the larger islands. It helped that they had a monetary board that encouraged high investment levels. But this was complemented by concessionary flows used productively and by foreign direct investment. Now the question is how well these economies will fare when they face the inevitable reduction in concessionary flows in coming years.Payment Systems&Infrastructure,Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism,Financial Intermediation,Economic Theory&Research,Environmental Economics&Policies,Achieving Shared Growth,Inequality,Financial Intermediation

Recent economic performance of developing countries

The GDP growth rate in the developing countries averaged 4.1 percent between 1980 and 1988. Many dynamic countries - chiefly in Asia - did exceedingly well during this period, but many others - typically in Sub-Saharan Africa - regressed. In general, the highly indebted countries have stagnated. If the prospects for the most deprived and highly indebted countries are to be improved, they will need to channel significant real flows into investments. This could be done through a combination of new external debt initiatives and growth inducing domestic policies. Appropriate domestic policies are essential so that external inflows are not negated by higher consumption levels. Perhaps it is time to reassess the Marshall Plan that reinvigorated the depleted post-war Europe. The Marshall Plan provided needed resources in a relatively short period, and since the aid did not carry an interest burden the authorities were not preoccupied with financial engineering.Financial Intermediation,Trade and Regional Integration,Environmental Economics&Policies,Economic Theory&Research,Achieving Shared Growth

Population aging and pension systems : reform options for China

Using an integrated simulation model, the authors estimate the scope and speed of population-aging in China, the cost of supporting the old, and the impact of different reform options and pension arrangements. Among their conclusions: The scope and speed of population-aging in China make the present pension system financially unsustainable, even assuming that GDP grows steadily in the long term. Moving the retirement age back would provide a temporary fix for the current pay-as-you-go pension system but would be politically viable only where there is great demand for labor. Pension funds could be made more sustainable by increasing GDP growth, raising contribution rates, or gradually reducing benefit rates. But the financial costs and social obstacles of those reform options must be carefully assessed. Fully funded, privately managed pension schemes might be feasible, but require a sound regulatory framework and institutional infrastructure,including financial markets that provide adequate savings instruments and insurance options. Pension reform is a long-term, multidimensional problem involving economic, social, political, and cultural factors. Governments should not focus only on taxes and transfers to redistribute income to and among the elderly. Real income growth is needed to cope with poverty among the elderly, especially in developing countries. To establish an adequate, efficient, and equitable social security system, China must maintain long-term socioeco nomic stability and sustainable growth. China could improve the labor market by removing management rigidities, facilitating human resource development, making labor markets more competitive, improving the household registration system, improving incentives, and rewarding hard and innovative work. To reduce unemployment, China can create more job opportunities in nontraditional sectors, especially its underdeveloped service industries. To shift jobs to the nonagricultural sector, it can develop medium-size cities. And to cushion the impact of demographic shocks, China should preserve traditional values and maintain family-community support. Drawing on experience in Europe and Latin America, China should move toward a transparent and decentralized system with 1) a fully funded, portable, defined-benefit pension plan, designed to meet basic needs, and 2) occupational pension plans or personal savings accounts to satisfy demand for maintaining or improving living standards.Public Health Promotion,Health Economics&Finance,Environmental Economics&Policies,Pensions&Retirement Systems,Labor Policies,Environmental Economics&Policies,Health Economics&Finance,Governance Indicators,Pensions&Retirement Systems,Achieving Shared Growth

Malaria and growth

The authors explore the two-sided link between malaria morbidity and Gross Domestic Product (GDP) per capita growth. Climate significantly affects cross-country differences in malaria morbidity. Tropical location is not destiny, however: greater access to rural health care and greater income equality are associated with lower malaria morbidity. But the interpretation of this link is ambiguous: does greater income inequality allow for improved anti-malaria efforts, or does malaria itself increase income inequality? Allowing for two-sided causation, the authors find a significant negative causal effect running from malaria morbidity to the growth rate of GDP per capita. In about a quarter of their sample countries, malaria is estimated to reduce GDP per capita growth by at least 0.25 percentage point a year.Health Monitoring&Evaluation,Public Health Promotion,Disease Control&Prevention,Early Child and Children's Health,Climate Change,Health Monitoring&Evaluation,Early Child and Children's Health,Climate Change,Poverty and Health,Health Service Management and Delivery

Creating partnerships for capacity building in developing countries - the experience of the World Bank

The authors discuss a variety of experiences in a number of transition, and developing countries to build institutional capacity for economics education. A flexible approach met with some success. The approach uses partnerships that combine the often different needs of a number of private donors, with the World Bank on the supply side. Much of the success was due to adopting each effort to the individual country situation. The authors also provide a brief summary of five academic institutions, and four research networks in Europe, Africa, Asia, and Latin America.Public Health Promotion,Health Monitoring&Evaluation,Agricultural Knowledge&Information Systems,Decentralization,ICT Policy and Strategies,ICT Policy and Strategies,Health Monitoring&Evaluation,Agricultural Knowledge&Information Systems,Tertiary Education,Scientific Research&Science Parks