What to do when markets and governments fail poor people

Transcription

1 What to do when markets and governments fail poor people Shanta Devarajan World Bank

2 Market failures and their solutions Area Market Failure Intervention Trade and industrialization Learning-by-doing externalities (infant industry) Import tariffs and quotas Infrastructure Public goods Public investment, subsidized or free services Health and Education Externalities Free, public provision

3 Government failures 1. Trade and industrialization: Cronyism

4 Net employment creation in Tunisia, Job gains Job losses Source: World Bank, The Unfinished Revolution, Tunisia Development Policy Review, September 2014.

5 Source: The Economist.

6 Regulations favored connected firms in Tunisia Ben Ali firms Other firms N Mean Sum (USD) N Mean Sum (USD) Ben Ali Share of Total L , ,036, % Y ,980,822 2,071,660, ,300 62,512,270, % Net Profits 122 1,908, ,888, ,090 1,074,153, % Gross Profits 122 2,811, ,946, ,320 5,261,372, % Gross Losses , ,057, ,230-4,187,219, % Note: USD:TND exchange rate1:1.5146, data for 2010, L=wage workers, Y=output, Net profits=pre-tax profits declared to the tax authorities (all firms), gross profits=pre-tax profits declared to the tax-authorities only for firms for whom this is positive. Gross losses=tax profits declared to the tax authorities only for firms for whom this is negative. Source: Rijkers, Freund and Nucifora, All in the family: State capture in Tunisia, 2014.

7 Government failures 1. Trade and industrialization: Cronyism 2. Infrastructure: Political patronage A. Water in India

8 Water quality in India is getting worse Estimated hours of supply per day in selected Indian cities, 1980s-2000s Chennai Bangalore 24 hours 24 hours s 1990s 2000s Hyderabad Vizag 24 hours 24 hours Source: Interview ASCI.

9 24x7 water: A pipe dream? Goa Chandigarh Mumbai Delhi Patna Ludhiana Jodhpur Dasuya Dera Bassi Paris Jaipur Ahmedabad 145 Bikaner 133 Bangalore 123 Gurdaspur 108 Bathinda 106 Bharatpur 105 Udaipur 80 Chennai 32 per capita lpd vs. hours of supply/day Source: Data collcted from he water boards or utilities.

10 Service to the poor is big business

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12 Government failures 1. Trade and industrialization: Cronyism in Tunisia 2. Infrastructure: Political patronage A. Water in India B. Roads in Africa

13 Selected corridors of the study

14 Transport prices - most expensive in the world Transport Cost 1 Central Africa East Africa West Africa Southern Africa France Total Cost Transport Prices USD per veh-km; 2. US cents per tkm

15 Profit margins Accra-Bamako 80% Ngaoundere-N'Djamena 118% Mombasa-Nairobi 66% Mombasa - Kampala 86%

16 Example of the impact of market deregulation The case of Rwanda Average transport prices (constant and current) from Mombasa to Kigali

17 Government failures 1. Trade and industrialization: Cronyism in Tunisia 2. Infrastructure: Political patronage A. Water in India B. Roads in Africa 3. Health and Education in India and Africa: Distorted incentives in the public sector

18 In India, student learning levels are declining Source: Annual Survey of Education Results, 2014.

19 All India teacher absence map (Public Schools) Source: Kremer, Muralidharan, Chaudhury, Hammer, and Rogers Teacher Absence in India. Teacher State Absence (%) Maharashtra 14.6 Gujarat 17.0 Madhya Pradesh 17.6 Kerala 21.2 Himachal Pradesh 21.2 Tamil Nadu 21.3 Haryana 21.7 Karnataka 21.7 Orissa 23.4 Rajasthan 23.7 West Bengal 24.7 Andhra Pradesh 25.3 Uttar Pradesh 26.3 Chhatisgarh 30.6 Uttaranchal 32.8 Assam 33.8 Punjab 34.4 Bihar 37.8 Jharkhand 41.9 Delhi - All India Weighted 24.8%

20 0 Salary in Rs. 2,000 4,000 6,000 Public school teachers are paid a (lot) more Teacher Compensation 6178 Definitions 5299 Unadjusted Wage is the average wage of teachers in the public and private sector The adjusted wage is what a 25 year old female with a bachelors degree and a 2-year teacher training course residing locally would earn in the public and private sector Unadjusted Adjusted Unadjusted Adjusted Private Public

21 Deviation from Mean Salary in Rs Teacher absenteeism and compensation The public sector pays more absent teachers more The private sector pays more absent teachers less Days Absent per Month Private Schools Public Schools The figure is based on a nonparametric plot of deviations from mean salary against the number of days absent. Salary results are presented as deviations from mean. So the number 200 on the vertical axis means that the person s salary is Rs.200 more than the average salary for the sector

22 Leakage of resources in health Country (year) % of cash/in-kind resources leaked Resource Category Kenya (2004) 38 Non-salary budget Tanzania (1991) 41 Non-salary budget Uganda (2000) 70 Drugs and supplies Ghana (2000) 80 Non-salary budget Chad (2004) 99 Non-salary budget Source: Gauthier (2006).

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24 What is to be done?

25 Unbundling government failure Principal Citizens Political Leaders Public Officials Agent Political Leaders Public Officials Frontline Providers

26 Grants for primary education in Uganda US$ per Student 3.5 Primary Education in Uganda (PETS) In 1995, survey of 250 primary schools in 19 of 39 districts; Survey repeated in 1998 and Intended Grant Amount Received by School (mean)

27 How citizen engagement affects the principal-agent relationships Healthy citizen engagement: Leaders selected and sanctioned based on performance in delivering public goods Unhealthy citizen engagement: Leaders selected on basis of providing private goods (vote buying, etc.). Citizens Political Leaders Accountable leaders *Diminished accountability and citizens expectations on performance. *Special interests capture leaders. Political Leaders Public Officials Public Officials Frontline Providers Selected public officials are accountable Public officials selected with incentive to monitor providers *Incentives and norms within public bureaucracies distorted. *Leaders legitimacy compromised. *Jobs as political patronage. *Providers not monitored (absenteeism, etc.) *Local elites capture civil society and «invert» principal-agent relationship

28 How to move from unhealthy to healthy citizen engagement Global shift toward democratic institutions for political engagement,

29 How to move from unhealthy to healthy citizen engagement (cont d) Transparency In order to decide how to vote in the upcoming elections, how much more information would you like to have?

30 Correlation between media freedom and corruption

31 What kind of transparency is most effective? Impartial, reliable and specific information about performance of leaders in delivering public goods Timely to the political process Communicated through competitive media markets

32 Has Anyone Heard of the VEC? Villagers Who Don't Know of a Village Education Committee Villagers Who Think there is a VEC 92.4% 7.6% 5.0% 1.1% 1.5% Villagers Who Believe there is a VEC, But Can't Name Any VEC Members Villagers Who Can Name Only One or Two VEC Members (the Pradhan and/or Headmaster) Villagers Who Can Name More VEC Members than Just the Pradhan and Headmaster * Based on 2,803 household surveys in 4 random blocks in the District of Jaunpur, UP. Each household is weighted by total number of households in village divided by number households surveyed in village.