Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World

While increased exposure to the global economy is associated with increased welfare effort in the Organization for Economic Cooperation and Development (OECD), the opposite holds in the developing world. These differences are typically explained with reference to domestic politics. Tradables, unions, and the like in the developing world are assumed to have less power or interests divergent to those in the OECD interests that militate against social spending. I claim that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets. While income shocks associated with international markets are quite modest in the OECD, they are profound in developing nations. In the OECD, governments can respond to those shocks by borrowing on capital markets and spending countercyclically on social programs. No such opportunity exists for most governments in the developing world, most of which have limited access to capital markets in tough times, more significant incentives to balance budgets, and as a result cut social spending at the times it is most needed. Thus, while internationally inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption (and particularly consumption by the poor) across the business cycle.The author would like to thank Steph Haggard, Kristin Bakke, Wongi Choe, Tim Jones, and seminar participants at Duke University, Penn State University, Washington University, MIT, and the University of New Mexico for their helpful comments. Nancy Brune, Mark Hallerberg and Rolf Strauch, and Nita Rudra were very generous in providing their capital account, OECD fiscal, and potential labor power data, respectively.

Local Organizations—Movement Towards Self-Reliance ResiliencyCambodia Impact Evaluation

The ResiliencyCambodia program implemented under the United States Agency for International Development (USAID)/Cambodia’s Local Organizations—Movement Towards Self-Reliance (LO-MTSR) is designed to increase the organizational resiliency of Cambodian civil society organizations (CSOs) across the health; education; food security; agriculture; and democracy, human rights, and governance (DRG) sectors. Organizations will increase their capacity to expand their networks and tap into new markets and revenue streams, thereby decreasing their reliance on aid from foreign donors. The LO-MTSR Impact Evaluation (IE) seeks to assess the outcomes and impacts of interventions that occurred as part of the ResiliencyCambodia program, primarily the implementation of an innovative ResiliencyCambodia Framework, which uses adaptive strategies, more effective narratives, alternative organizational and funding models, stronger mechanisms of transparency and accountability, and wider networks across the public, private, and non-profit sector to increase organizational resiliency. Interventions include trainings, toolkits, networking events, and financial resources. The IE utilizes a randomized control trial (RCT) designed to estimate the impact of an intervention by comparing outcomes for treated units with outcomes for a “counterfactual” group that was randomly selected to not receive the treatment. The IE is designed as a tiered intervention with two treatment cohorts, one receiving a low-intensity (LI) treatment and the other receiving a high-intensity (HI) treatment. A third group serves as a control. Treatments include attending training sessions in social media use, training in financial diversification, and a stipend to pay for leadership development. The IE will test three research hypotheses that follow from the evaluation objectives and LO-MTSR theory of change at the organizational level. Specific hypotheses in this IE include: Organizations participating in the ResiliencyCambodia program will: ● Increase organizational, administrative, and financial capacity. ● Decrease the organization’s reliance on funding from USAID and other interventional donors, the Royal Government of Cambodia (RGC), and large international donors at odds with USAID’s Country Development Cooperation Strategy (CDCS) objectives. ● Increase the size of the organization’s CSO network within and across sectors

Labor Standards, Labor Endowments, and the Evolution of Inequality

Proponents often recommend high labor standards as a means of reducing inequality between and within countries. Opponents suggest that labor standards exacerbate international and domestic inequalities. In this paper, we forward a simple argument whereby the impact of higher labor standards on domestic inequality depends on a country's labor endowment. We hypothesize that where labor is abundant, higher standards will exacerbate inequality. Where labor is scarce, higher labor standards might lower inequality. In both cases, the impact of labor standards on inequality work through an employment and wage effect. Using newly available data on labor standards around the world from 1981 to 2000, we provide evidence largely consistent with our hypotheses. Higher labor standards do, indeed, exacerbate inequality in labor-abundant economies. On the other hand, higher labor standards lower inequality in labor-scarce economies. We discuss the implications of these findings for work on labor market insiders and outsiders as well as the political economy of development