This section consists of short analytical papers and briefs by USAID economists and guests on significant and timely issues related to international development. The views expressed are those of the authors, and do not represent official positions of the United States Government or of USAID.
The research papers bring important economic findings, insights, and puzzles to light, and are published as contributions to ongoing debate.
Cost-Benefit Analysis of Off-Grid Solar Investments in East Africa
January 30, 2017
Authors: Nathan Martinez, Paul Oliver and Adam Trowbridge
Abstract: Economists from USAID’s Office of Economic Policy conducted a cost-benefit analysis (CBA) of four off-grid solar energy investments, representing $8.4 million in development assistance through USAID’s Development Innovation Ventures (DIV). The objective of the analysis was to determine the value for money of USAID’s investment by measuring the financial and economic cost of producing and distributing these products, as well as the impact on households.
Economic growth is associated with reduced child undernutrition
November 15, 2016
Authors: Stephen A. O’Connell and Caroline Smith
Abstract: Vollmer et al. (Lancet Global Health, 2014) employ Demographic and Health Survey (DHS) data to argue that there is virtually no empirical link between economic growth and early childhood undernutrition. We re-examine this link and come to a very different interpretation.The authors’ own results imply a meaningful association between growth and undernutrition,and this link is much stronger once we correct for straightforward issues of measurement error,duration, and influence. An effective attack on early childhood undernutrition must be two-pronged, combining direct health interventions with vigorous efforts to advance economic growth. An abbreviated version of this Brief appears in Lancet Global Health, December 2016.
Person-Equivalent Poverty: An Introduction
September 22, 2016
Authors: Stephen O’Connell and Don Sillers
Abstract: In its 2015-16 Global Monitoring Report, the World Bank introduced the “person-equivalent headcount ratio” of Castleman, Foster, and Smith (2015), an intuitively appealing indicator that combines the conventional headcount ratio with the poverty gap index. This brief explains the new measure and some of its properties – including its simple relationship to the total monetary gap between the poverty line and the consumption of the poor – and shows how the global distribution of poverty shifts when examined through a person-equivalent lens. Not surprisingly, the prevalence of person-equivalent poverty is markedly higher than that of conventionally measured poverty in sub-Saharan Africa, reflecting the relatively severe depth of poverty in that region. It is considerably lower than conventional poverty in South and East Asia. We argue that for purposes of monitoring the severity of the global poverty challenge, person-equivalent poverty provides a better summary measure than either of its components.
Country Selectivity and Extreme Poverty
December 11, 2015
Author: Michael Crosswell, Economist, PPL Bureau, Office of Policy
Abstract: This paper focuses on the two basic selectivity criteria for allocating foreign assistance among countries -- need and effectiveness. We discuss appropriate indicators for these concepts when the goal of aid is broad-based development, and point out that other goals will generally require distinct indicators. In the case of ending extreme poverty, however, an assessment of domestic resource availability leads us away from conventional poverty indicators as selectivity criteria, despite their indispensable role in monitoring progress. We argue that the need for extreme-poverty assistance is a function of real income per capita – the same as for development assistance; and that the appropriate indicators of effectiveness also correspond to those for development assistance. These conclusions are strengthened by the multi-dimensional nature of extreme poverty. Finally, we examine alternative selectivity criteria that will loom large in debates on extreme poverty strategy, with an eye to understanding and explaining the differences.
The End of the Commodity Super-Cycle? Implications for USAID Presence Countries
December 10, 2015
Author: Gregory Gangelhoff, Economist, E3 Bureau, Office of Economic Policy
Abstract: The prices of the world’s most important commodities tripled between 1999 and 2008, with the price of oil increasing by a factor of 8. Since 2008, however, commodity prices have fallen by over 50 percent. Large commodity-price movements affect economic growth prospects and have important implications for government revenues and macroeconomic management in commodity-exporting countries. Most forecasters do not expect a strong revival of prices in the next few years. We review recent trends and explore the implications for USAID presence countries of a potentially extended period of low commodity prices.
Is $1.82 the New $1.25? Choosing the Next International Extreme Poverty Line
July 14, 2015
Author: Don Sillers, Economist, E3 Bureau, Office of Economic Policy
Abstract: This brief summarizes the technical and political issues surrounding the World Bank’s impending choice of a new International Extreme Poverty Line (IEPL) based on the 2011 Purchasing Power Parity (PPP) exchange rates. The new line, to be announced in July 2015, will succeed the current IEPL, $1.25 per day at 2005 PPP. Significantly, this will be the first such change since President Obama and other world leaders committed the global community to eradicate extreme poverty within a generation. As the metric that will be used to track progress against this bold target, the choice of a new IEPL has attracted considerable attention within the development community. The evidence suggests that the new line will be set at, or very near to, $1.82 per day at 2011 PPP. The brief weighs the merits of this choice.