Lit in Review: Impacts of thte 2010/11 Surge in Food Prices

Ivanic, Maros, Will Martin, Hasan Zaman. (2011). “Estimating the Short-Run Poverty Impacts of the 2010-11 Surge in Food Prices.” World Bank Development Research Group, Policy Research Working Paper 5633, Apr

In the 2007/08 price increase, most of the price increase was concentrated in staple cereals. This meant the effects were concentrated on the poor who had few outside options to shift to. In the current price shock, however, food prices have increased in many more commodities and by less overall. This means there are more substitutions available and much of the hit has affected foods the poor consume less of anyway. As a result, they estimate that only 44 million more people are poor instead of the 105 million more in 07/08.

However, it appears that price transmission is higher this time than last.

Successes: Disaster Response in Indonesia

From Tales in the Hood:

By the time Haiti was but a few hours old on CNN, the rest of the world had forgotten about Padang. And Manila, Kompong Thom, Savannakhet, Quang Nam, and southern Taiwan… All of those places slammed by Typhoons and small tsunamis and earthquakes last fall. ...

I’m also impressed with how well the overall response has gone. Not that everything in Padang is fabulous. But amazing progress has been made in the nine or so months since the earthquake.

Good coordination, straightforward response by the right agencies, lack of celebrities, shortage of well-meaning interveners, no peanut gallery or politicians to play for ... just professionals helping people.

No, the Padang earthquake response ran the old-fashioned way: professional aid organizations, whether international, local or governmental, planned and then implemented a straightforward emergency response. They figured out what the earthquake survivors needed by asking them, and then got them that – not something like the thing that they wanted, not something altogether different but that could, with some imagination, be used in place of what they needed… No, simply got them what they needed in the most direct and efficient manner possible.
And you can tell. The people I talked to today were happy about how things had gone and were going, the terrible disaster of last September notwithstanding. They expressed hope.
…
That’s the way you do emergency response.

Lit in review: Effects of Activism

Harrison and Scorse, "Multinationals and Anti-Sweatshop Activism," AER (2010), Vol. 100, No. 1, 247-273, ungated.

Pro-market-eers claim that people can "vote with their dollars" to express their disapproval of corporate actions and encourage proper actions. How effective is consumer activism in actually changing corporate governance? Harrison and Scorse study the anti-sweatshop movement in the US aimed at Nike, Adidas, and Reebok during the 1990s in Indonesia. Two things happened: the Indonesian government, under some pressure from the US government, raised the minimum wage in real terms; and shops in the textile, footwear, and apparel industry also raised their average wages.

Identification is not based on actual firm ownership or contracts, but the probability of a workshop being targeted is estimated based on census, corporate information, and region. They find that activists were successful in increasing wages in targeted firms: the wage increase was 10-20 percent larger than in foreign-owned firms in other industries and 30 percent larger than other firms in their industry. The increase largely came from greater compliance with minimum wage laws. The employment effects were small - smaller firms left the industry while larger firms did not noticeably change the size of their workforce - but profits decreased significantly.

Among factors they say were decisive is an open political atmosphere and the teamwork between US and Indonesian NGOs. Activism increased both the probability that firms would be detected paying below minimum wage and the penalty for firms that were caught. This was more important for large firms, like the multinationals, for whom bad press meant more. The one downside is that some firms have moved to other countries with lower wages, so the net effect is complicated (negative for people in Indonesia who would have been employed, positive for people in other countries who are now employed, negative for people in other countries now employed under bad conditions). Some criticisms.

For the Next MDGs

Matt at Aid Thoughts has some good thoughts about the MDGs:

For one, the MDGs are a broad set of international goals, but they do not comprise a one-size-fits-all policy, yet we continue to treat them as comparable indicators and implicitly weight them equally (this is reinforced by the structure of the MDGs). Why should India, where less than 80 children per 1,000 die before their fifth birthday, put the same weight on halving under-five mortality as Malawi, where over 130 children suffer the same fate? What if Indonesia decides it wants to put more weight on industrial policy than agricultural policy, with the expectation that the former will do more to reduce poverty in the long run? I think policy-makers and researchers often confuse the normative aspects of the MDGs (what we want to achieve) with the operational side (by trying to directly target each of the things we want to happen). ...

Several months ago, I suggested that the next set of MDGs to be built from the ground-up, an aggregation of the goals of multiple development strategies. Instead of the international community telling developing countries what their priorities should be, then scouring planning documents to ensure adherence, the structure should grow from the opposite direction. Governments and civil societies in poor countries need to determine their own objectives for development, after which the international community should do its best to help them achieve it.