Ideas to Action:

Independent research for global prosperity

CGD Policy Blogs

 

Reinhart-Rogoff: The Problem and Solutions

Paraphrasing "jesting Pilate", "what is truth when academic superstars supposedly produce it?" is possibly the most important yet neglected question raised by the recent Reinhart-Rogoff (R-R) affair.

The essential facts of this episode are these: two Harvard professors, Carmen Reinhart and Kenneth Rogoff, used their academic research to become strong advocates in the policy realm, although not among fellow academics, of the need for fiscal austerity when economies approach a threshold level of debt-to-GDP ratio of 90 per cent. Their superstar reputations (deservedly earned through previous work) rendered their advocacy influential, even highly so, in the charged policy debates in the United States and all over Europe. The research - especially the critical and attention-grabbing finding of a sharp growth discontinuity at that 90 per cent threshold - was subsequently exposed as flawed.

A Global Map of Subnational GDP

Nicola Gennaioli, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer have just published a fascinating paper in the QJE: “Human Capital and Regional Development”.  They constructed a database of 1,569 subnational regions across 110 countries covering GDP, population, education levels, geographic and institutional factors, and looked at correlates with higher per capita income.  They suggest that geography and education are significant correlates of regional GDP, while their measures of institutions and culture are less well correlated.  They have followed up with a working paper using an expanded dataset, “Growth in Regions” that reports regional convergence of 2.5% a year and note that a rate so slow suggests “significant barriers to factor mobility within countries.”

How Committed to Equity are Latin American Governments?

Latin America’s distribution of income and wealth has long been the most unequal in the world—but poverty and inequality have been falling consistently since 2000 in most countries of the region. What has changed in Latin America? Are the region’s governments more committed to equality than in the past? Have their tax and spending policies improved? Which governments are most committed? Which least? What policies and programs have been most effective in redistributing income? Are they sustainable? What is holding Latin America back from faster gains?