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The
potential benefits of a more integrated World are huge, but unevenly
distributed. Globalization requires adjustment, flexibility, mobility
and change, but many people are ill-equipped to handle change and
unable to turn change into new opportunities.
The
ability to take advantage of change
is highly correlated with education, which is why well-educated people
and countries benefit much more from globalization than poor,
un-educated people and countries. In a dynamic and rapidly changing
world, the poor are often either left behind or may even suffer
reductions in living standards as their skills and jobs get replaced
by new technology.
Rather
than trying to slow down progress to avoid that people have to adapt
to change, we should help people everywhere to become more flexible,
mobile, and imaginative, so that they are better able to take
advantage of changing opportunities. This includes not only giving
them access to modern education and technology, but also reducing
obstacles to migration.
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Much aid is given with the opposite objective: To improve living
conditions for the poor at their place of origin in order to prevent
that they move to cities or more developed countries. But fighting the
strong forces of change in this way rarely provides permanent
solutions. It may provide temporary relief, but it generally just
postpones the inevitable adjustment that will have to be made if
people are to escape poverty.
1)
The
Dynamic Impacts of Aid on Recipient Behavior
This
project makes a micro-level analysis of the dynamic impacts of
remittances in order to understand how households change their behaviour
in response to the receipt of significant amounts of unconditional aid.
For this purpose we test how remittances affect school attendance, labor
supply, consumption patterns, investment propensities, and future social
mobility,
The data used for the project
consists of the two Living Standard Measurement Surveys conducted in
Nicaragua in 1998 and 2001. The huge advantage of this data is that it
follows the same persons over time. This kind of longitudinal data is
very rare in developing countries, but extremely useful since it allows
us to test causality, rather than just discovering correlations.
Nicaragua also provides an excellent case study of the impact of aid, as
the country receives substantial amounts of remittances (around 10% of
GDP) as well as substantial amounts of official development assistance
(also around 10% of GDP).
Lykke Andersen
Oscar Molina, Bent Jesper Christensen
(University of Aarhus, Denmark).
Global
Development Network and University of Aarhus. This project won
the 2004 Global Development Award for Outstanding Research on
Development.
2)
The Effectiveness of Foreign Aid in Bolivia
The project investigates the effectiveness of foreign aid in
Bolivia. When comparing accumulated aid in each sector during the period
1998-2002 with the progress in each sector during the same period, it
becomes clear that the four sectors receiving by far the most aid
(Institutional strengthening, Rural Development, Roads, and Budget
support) have shown disappointingly little progress. When the impact of
aid is analyzed in a Computable General Equilibrium model, it becomes
clear that aid tends to have a positive effect on growth, but only in
the short run, and it tends to have an adverse effect on the income
distribution.
Lykke Andersen
José Luis Evia.
British Development Cooperation (DFID),
Spanish Development Cooperation, Fundación Milenio.
3)
Foreign Aid and Productivity
The paper reexamines empirically the robustness of competing
theories of foreign aid effectiveness. By shifting the focus from the
effects of aid on income to effects of aid on productivity, it is
possible to put to test 3 existing theories of foreign aid
effectiveness. The results provide support for the hypotheses that (i)
aid has a positive effect in fostering growth of average productivity,
(ii) aid doesn't operate with diminishing returns, and (iii) the
magnitude of the total effect depends on climate-related circumstances.
The results support the policy recommendation previously made in the
literature to seriously reconsider the conditionality rule for foreign
aid disbursements.
Pablo Selaya
University of Copenhagen, Denmark.
4)
Labor Mobility in Bolivia: On-the-job Search Behavior of Private and
Public Sector Employees
This project compares on-the-job search behavior of employees in the
private and public sector in Bolivia. The empirical evidence indicates
that skilled workers are scarce, and that the private sector has trouble
attracting and maintaining the skilled workers they need, as skilled
workers are attracted by the much more favorable working conditions in
the public sector (higher salaries, shorter working hours, more
job-security, worker benefits). The imbalance between private and public
sector pay is likely created by the large amounts of foreign aid inflows
to the government (about 10% of GDP).
Lykke Andersen
Bent Jesper Christensen (University of Aarhus,
Denmark), Claudia Delgadillo.
University of Aarhus.
5)
Rural-Urban Migration in Bolivia:
Advantages and Disadvantages
This
paper examines rural-urban migration in Bolivia. Its central argument is
that the negative effects of rural-urban migration are significantly
smaller in Bolivia than in other Latin American countries and that the
benefits are potentially large.
The
paper examines the impact of Bolivia's geography, history and population
on urban-rural migration. It looks at the major costs of urbanization
and shows how the major problems are less in Bolivia. It examines
reasons for migration and analyses the situation and performance of each
group of migrants. It then discusses "good" and
"bad" migration and how policies can be developed to encourage
"good" migration.
Lykke Andersen
German Development Bank (KfW), Kiel
Institute for World Economics.
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