Accueil > Country Development Strategies: the HRV Framework

KINT 7595 - Country Development Strategies: the HRV Framework

Type d'enseignement : Seminar

Semester : Spring 2017-2018

Number of hours : 24

Language of tuition : English

Voir les plans de cours et bibliographies

Pre-requisite

None

Course Description

This course is for students who want to guide development strategy for a developing country, either within its government or from an aid agency. Today, we see so many development recommendations – some weighty, others not. This course uses the Hausmann-Rodrik-Velasco (HRV) theory of binding constraints to organize higher-probability responses to development challenges. The 1st half of the course focuses on the HRV framework and technical solutions: fiscal/financial/regulatory/infrastructure/health/education. Of course, technical solutions often fail because of institutional/social/political constraints, including corruption & conflict. The 2nd half of the course addresses these and seeks to identify practical responses to allow development. Objective of the course: (1) Understanding how endowments/policies/programs affect growth & welfare in developing countries; (2) Appreciation of how institutional/social/political factors may impede development (& practical responses); (3) Practice in synthesizing technical solutions and practical responses into a Country Development Strategy.

Teachers

MAKO, William Peter (Retired, after 17 years at the World Bank (1997-2014) & 14 years at Price Waterhouse (1983-1997))

Pedagogical format

Lectures (about 70%) will impart an organizing framework and technical knowledge. Case discussions (15%) will allow students to exercise judgment on real-world situations. Country Development Strategy report-writing and presentation (15%) will provide practice in enhancing technical solutions with necessary institutional/political initiatives.

Course validation

40%: Mid-term examination on required reading and lectures ; 45%: Country Development Strategy paper ; 15%: Class participation in case discussions.

Workload

Individual reading of up to 25 pages per week. Team work on a Country Development Strategy of about 15 pages and PowerPoint presentation.

Required reading

  • Dani Rodrik, “Goodbye Washington Consensus, Hello Washington Confusion,” December 2006
  • John Williamson, “What Washington Means by Policy Reform,” November 2002
  • Daron Acemoglu, et al, “An African Success Story: Botswana,” July 2001
  • Case studies

Additional required reading

Francis Fukuyama, Political Order and Political Decay, 2014

Plans de cours et bibliographies

Session 1: Binding Constraints on Economic Development

  • Lecture will first summarize how development thinking has evolved since 1945. After introducing the Hausmann-Rodrik-Velasco (HRV) theory of binding constraints, the lecture will review empirical support (or lack thereof) for HRV. Class will conclude with discussion of the uses and limitations of HRV. This session will also address any questions students may have about this course.

Required readings:

  • Dani Rodrik, “Goodbye Washington Consensus, Hello Washington Confusion,” Journal of Economic Literature, December 2006.

Session 2: Market Failure vs. Government Failure

  • Lecture will first review common “market failures” (e.g., externalities, insufficient public goods, imperfect competition) and effective public sector responses.  Too vigorous a public response, however, may lead to “government failure.”  Governments often intervene in markets to achieve various desired outcomes.  Such interventions may distort prices of outputs and/or factor inputs, resulting in over- or under-investment, low competitiveness, and macroeconomic instability.  Prescriptions to reverse such interventions are characterized as the “Washington Consensus.”

Required readings:

  • John Williamson, “What Washington Means by Policy Reform,” Peterson Institute, November 2002.

Recommended readings:

  • Markus Kitzmuller and Martha Martinez Licetti, “Competition Policy: Encouraging Thriving Markets for Development,” Viewpoint #331, World Bank, September 2012.

Session 3: Fiscal Management

  • Following an introduction on the effects and frequency of sovereign debt crises or hyperinflation on economic prospects and social wellbeing, the lecture will discuss economic cycles and tools for counter-cyclical fiscal management, income inequality, major taxation and social expenditure alternatives, sovereign debt ratings, and fiscal management capacity challenges.

Recommended readings:

  • International Monetary Fund, “Vietnam: Staff Report for the Article IV Consultation,” Appendix II: Public and External Debt Sustainability Analysis, July 2017.
  • Carmen M. Reinhart & Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly, 2009.

Session 4: Access to Finance

  • Following class discussion of the Jordan small and medium enterprises (SME) case, the lecture will illustrate key relationships and vulnerabilities in banking (e.g., liquidity, capital adequacy), and risk/return issues that may constrain SME access to finance.  The lecture will also consider the role of SMEs in economic growth and employment, as well as the uses, limitations, and potential abuses of micro-finance.

Required readings:

  • Jordan SME case (5 pages)

Recommended readings:

  • World Bank, Financial Inclusion, 2014.

Assignment for this session:

  • Students should read and be prepared to discuss the SME case, which will be distributed before the class.

Session 5: Infrastructure, Health and Education

  • For the first half of class, the lecture will highlight the infrastructure needs of developing countries, potential financing, public-private partnerships (PPPs) vs. public provision, constraints on private investment, environmental and social safeguard issues, and organization of public procurement.  For the second half, the lecture will cover output/outcome measures for health and education, capacity and service delivery issues as well as innovative approaches, including support from conditional cash transfers (CCTs).

Recommended readings:

  • McKinsey & Company, Brighter Africa: The Growth Potential of the Sub-Saharan Electricity Sector, 2015.
  • W. Lim & W. Mako, “AIIB Business Strategy Decisions,” KDI School Working Paper Series, August 2015.
  • D.H. Perkins, et al, Economics of Development, chapters 8 (“Education”) and 9 (“Health).
  • World Bank, Conditional Cash Transfers: Reducing Present and Future Poverty, 2009.

Session 6: Mid-Term Exam

  • Exam based on lectures and required readings for Sessions 1 – 5.

Required readings:

  • See above

Session 7: Country Development Success Stories

  • Drawing in particular on the experiences of South Korea, Singapore, Malaysia, and Botswana, the lecture will explore how highly successful developing countries dealt with issues that could have derailed their development. These issues include lack of institutional capacity, ethnic or other social differences, corruption, and rising expectations for economic and political gain.

Required readings:

  • Daron Acemoglu and James A. Robinson, “An African Success Story: Botswana,” July 2011.

Session 8: Corruption

  • Following class discussion of corruption in the “Sovistan” case, the lecture will draw general explanations for corruption and reform efforts from a mix of high-income and developing countries.

Required readings:

  • Sovistan corruption case (5 pages).

Recommended readings:

  • Francis Fukuyama, Political Order and Political Decay, 2014.
  • Daron Acemoglu & James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Power, 2012.

Assignment for this session:

  • Students should read and be prepared to discuss the Sovistan corruption case, which will be distributed before the class.
  • Student teams are encouraged to submit first draft of Country Development Strategy report.

Session 9: Fragile and Conflict States

  • The lecture will address the frequency of civil conflict and its economic and social effects; conflict contributors, including fragility of state institutions; indicators of fragility; a framework for moving away from civil conflict toward sustainable peace; and measures to build state capacity.  Students will be expected to participate in class discussion of developments in Rwanda since the 1994 genocide.

Recommended readings:

  • World Bank, Conflict, Security, and Development, World Development Report, 2011.

Session 10: Student Presentations

Assignment for this session:

  • Student teams will give PowerPoint presentations on their Country Development Strategies
  • Final draft of each team’s final Country Development Strategy report is due.

Session 11: Student Presentations

Assignment for this session:

  • Student teams will give PowerPoint presentations on their Country Development Strategies

Session 12: Donors

  • As low-income countries may need official development assistance (ODA) to finance investments in public goods, this course concludes by considering international donors – their contributions, limitations, and abuses.  The lecture will address financial flows to developing countries; financing by multilateral development banks (MDBs) and bilateral donors; MDB business models; policy-based and investment lending; capital market effects; donor “coordination;” and tensions between donor conditionality (e.g., policies or environmental/social safeguards) and recipient sovereignty. 

Recommended readings:

  • Jeffrey Sachs, The End of Poverty: Economic Possibilities for Our Time, 2006.
  • William Easterly, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good, 2007.
  • OECD, Aid Effectiveness in 2011: Progress in Implementing the Paris Declaration, 2011.

Biographical Information

Title: Lead Specialist (retired)
Organization/Affiliation: World Bank
33 years of experience at the World Bank (1997-2014) and Price Waterhouse (1983-1997).  World Bank included technical advisory work, policy-based lending, and investment lending.  25 years of international experience was mostly in East Asia (including 4 years in the World Bank’s Beijing office), Middle East, and Eastern Europe.  Expertise includes financial crises, corporate governance, privatization, and investment climate.  Since 2015, a graduate school professor in South Korea/France and World Bank/ADB consultant in Vietnam and China.  Education: Yale University, School of Management (MPPM) and Georgetown University, School of Foreign Service (BSFS).  Member, Council on Foreign Relations.