The IMF's role in structural adjustment

In the 1980s conditional lending for structural adjustment in developing countries moved the IMF beyond its role of macroeconomic crisis management. Fund-supported adjustment programmes have often been flawed by a lack of distributional analysis and by poor sequencing of reforms, notably premature financial liberalisation. As a result they have caused avoidable hardship. In addition, the attempt to taper out aid as part of the reform programme leads to avoidable reductions in post-stabilisation growth. An important role for the Fund in post-stabilisation environments is to provide credible signals to private investors.

Intertemporal Syndromes: Redistribution from the Future to the Present..

This chapter focuses on a particular type of policy failure, namely the sacrifice of future income for present gain. All societies and their governments face a trade-off between present and future consumption. Choices become sufficiently erroneous to be seen as a 'syndrome' if governments prioritize current spending to such an extent that future consumption is actually lower than current consumption. Africa's intertemporal syndromes fall into two groups, unsustainable booms in public spending, and looting of assets. Bouts of unsustainable public spending were usually, although not invariably triggered by booms in revenues from natural resource rents. These were often amplified by unsustainable debt accumulation. Looting of assets occasionally took the form of dispossession of private assets, but more commonly the target was publicly owned assets. We include within our discussion of looting those episodes in which growth-reducing strategies such as capital flight were induced by an anticipation of looting.

Estimating Vulnerability

Many existing measures of vulnerability lack a theoretical basis. In this paper we propose to measure vulnerability rigorously as the welfare of a household which solves an intertemporal optimisation model under risk.In such models, in essence a stochastic version of the Ramsey model, an important part of chronic poverty may be caused by the ex ante response of households to risks. Our simulation results indicate that whether or not a household is to be classified as vulnerable depends strongly on the time horizon considered. We use the model to assess the accuracy of existing regression-based vulnerability measures. We find that these methods can be vastly improved by including asset measures in the regression.Vulnerability, household models.

Risk and Savings: a Taxonomy

Risk may induce precautionary saving but it can also reduce saving. The theoretical literature recognizes both possibilities, but favors a positive effect (both for developed and developing countries); the empirical literature is divided, reporting (small) positive effects for developed economies and (large) negative effects for developing countries. We show in a 2-period model how the effect of risk on savings depends not only on preferences but also on the type of risk

Insurance and Rural Welfare: What Can Panel Data Tell Us?

Assessing the scope for insurance in rural communities usually requires a structural model of household behavior under risk. One of the few empirical applications of such models is the study by Rosenzweig and Wolpin (1993) who conclude that Indian farmers in the ICRISAT villages would not benefit from the introduction of formal weather insurance. In this paper we investigate how models such as theirs can be estimated from panel data on production and assets. We show that if assets can take only a limited number of values the coefficients of the model cannot be estimated with reasonable precision. We also show that this can affect the conclusion that insurance would not be welfare improving.

Do Tenure Differences Influence the Improvement of Quality of Rented Land? Empirical Evidence from Rural Ghana

The implications of migrant agricultural production for the environment have interested policy makers in sub-Saharan Africa of late. The impacts in the region of migrant destination may be short-term including initial felling of trees, intensive land use, and application of techniques. In the longer term, tenants are expected to adjust their techniques to that of the indigenous landowners. This paper explains how migrant tenants manage the quality of rented plots in the absence of clearly defined property rights with a survey data from rural area in Ghana. An empirical model explaining the probability to invest in land improvements is formulated. The empirical results indicate that tenure differences and income levels of migrants and indigenous landowners play a critical role in investments in land improvements.Land Economics/Use,

Growth and Risk: Methodology and Micro Evidence

There has been a revival of interest in the effect of risk on economic growth. We quantify both ex ante and ex post effects of risk using a stochastic version of the Ramsey model. We develop a simulation-based econometric methodology which allows us to estimate the model in the structural form suggested by theory. The methodology is applied to micro data from a remarkable long-running panel data set for rural households in Zimbabwe. We find that risk substantially reduces growth: in the ergodic distribution the mean (across households) capital stock is 46% lower than in the absence of risk. About two-thirds of the impact of risk is due to the ex ante effect (i.e. the behavioral response to risk) which is usually not taken into account in policy design. Our results suggest that the e¤ectiveness of policy interventions which reduce exposure to shocks or help households in risk management may be seriously underestimated.Farm household models, stochastic Ramsey growth models, estimation by simulation.

Vulnerability in a Stochastic Dynamic Model

Most measures of vulnerability are a-theoretic and essentially static. In this paper we use a stochastic Ramsey model to find a household's optimal welfare and we measure vulnerability as the shortfall from the welfare attained if the household consumed permanently at the poverty line. The results indicate that vulnerability is very sensitive to the time horizon considered. We find that the accuracy of existing regression-based vulnerability measures can be greatly improved by including asset measures in the regression

Growth Regression and Economic Theory

In this note we show that the standard, loglinear growth regression specificationis consistent with one and only one model in the class of stochastic Ramsey models. Thismodel is highly restrictive: it requires a Cobb-Douglas technology and a 100% depreciationrate and it implies that risk does not affect investment behavior