Mukti

Political impact of remittances

Posted in democracy, elections, labour, political economy, politics by jrahman on July 12, 2017

Along with the garments industry and the NGOs, there is a broad consensus that remittances have played a key role in Bangladesh’s economic development over the past decades.  Notwithstanding that broad consensus, the economic impact of remittances may be more nuanced than one might think, as I conjectured a long time ago:

Well, how about a stylised, and very speculative, story along this line — while RMG has meant women entering the formal workforce, migrant worker boom has sent a lot of risk-taking men overseas; aided by the NGOs and microcredit, households have smoothed consumption and invested in human capital of their children; but they have not invested in physical capital, avoided entrepreneurial activities, and have not pushed for a more investment-friendly polity.

We would want to explore this story further. We would also want to explore the income side of GDP, and tie it into a political economy analysis.

The remittance boom, for example, should see the labour share of the economy rise. Of course, the question is, what happens to the money that is remitted back? It’s reasonable to assume that unskilled labourers are from the poorer parts of the society. So, in the first instance, any remittance back to the villages is a good thing in that it reduces the direst type of poverty — that is it stops things like famine or malnutrition. But what happens after that? My tentative hunch is that a lot of remittance has been saved but not invested in a productive way, rather they ended up fuelling land/stock prices —this is an area that needs to be explored in detail.

Needless to say, I have not followed up on these questions.  But at least the economic impact of remittances is something people have thought about.  What about the political impacts?  That’s the question Shafiqur Rahman of Oregon University explores.*

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Economic herstory

Posted in development, economics by jrahman on July 5, 2017

I have been trying to get back into the habit of writing.  Nothing fancy or ambitious.  Around a thousand or so words a week.  I asked a close friend on what I should be writing about.  He advised:

Rotate between three big buckets: politics/history, pop culture, and economics. When writing about the first topic, make sure it won’t sound ridiculous in six months. And avoid talking about people and focus more on theory and data.

My friend reminded me of this passage from a three-decade old paper on economic growth.

The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.

I wonder what Nancy Stokey feels about that!  My partner will for sure not be happy if I spend all my time thinking about economics.  But when not thinking about strange stuff, it is indeed harder to come up with a bigger question than why some societies have so much higher living standards than others.

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Ramadanomics

Posted in economics, labour, macro, society by jrahman on June 19, 2016

Ramadan fasting is like no other Islamic ritual.  In the month of Ramadan, those who never perform the pre-dawn Fajr prayer get up even earlier to eat, only to abstain until dusk.  And after a month of that, even those who would otherwise never set foot in a mosque line up in unison to kneel towards Mecca.   For an entire month, from cooking, attire, TV to intimacy — the very lifestyle of a billion plus people change.  Except perhaps the aversion to pork, observance of, or at least respect to, the Ramadan fasting is arguably the most ubiquitous characteristic of Muslims.

Given its prevalence and ubiquity, Ramadan must have observable economic impacts.  Exactly what might they be?  In a fascinating paper, Filipe Campanile and David Yanagizawa-Drott of Harvard’s Kennedy School provide us with some answers.*  Summary — fasting makes us happier, if poorer.

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Khichuri index

Posted in economics, labour, macro by jrahman on December 24, 2015

A staple of political rhetoric in Bangladesh is to ensure affordability of rice, lentil, oil and salt.  Throw in a kilogram of coarse rice, 250 grams of red lentil, 40 ml soya bean oil and 10 mg salt and we get a rather bland plate of khichuri.  CEIC Asia database provides monthly retail prices of these essentials in Dhaka with a lag.  Currently, the latest data point is August 2014.  Still, using the bland recipe and prices (and smoothing the data by taking a 12-month moving average), we can get a sense of how the price of our plate of khichuri has evolved over time — for example, when BNP was turfed out in January 2007, such a plate cost around 35 taka, which rose to around 60 taka when the Awami League returned to power in January 2009, and was around 70 taka when its five year term expired.

Of course, to say anything sensible about prices, we need to have a sense of income.  From the same source, we can get daily wage of a skilled factory worker.  Her wages went from around130 taka a day in January 2007 to over 210 taka two years later to over 300 taka further five years on.

Putting the two together, we can get what I am going to call the Khichuri Index — plates of khichuri an average industrial worker can buy in Dhaka.  The chart below shows how the index has evolved between January 2000 and August 2014 (the period I have data for).

khichuri

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Political business cycle in Bangladesh

Posted in economics, governance, political economy, politics by jrahman on October 10, 2015

While looking for something else, I recently discovered that in 2013-14 financial year, Bangladesh government’s current expenditure — that is, money spent on salaries, procurement, subsidies and loan repayments — increased by 0.8 per cent of GDP.  On top of that, government investment also increased by 0.7 per cent of GDP.

That is a lot of spending.

Now, I haven’t been following economic and policy developments in as much detail as in the past, so I may well have missed great policy initiatives that underline the apparent spending binge.  But according to the work of IMF’s Christian Ebeke and Dilan Olcer of Riksbankrise in government expenditure of that magnitude is not uncommon in election years in developing countries.  More worryingly, they show that this kind of binge usually ends badly.

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Golden fibre

Posted in Bangladesh, economic history, economics, history by jrahman on October 3, 2015

Naeem Mohaiemen is a well known name in Bangla cyberspace, going all the way back to the days of soc.culture.bd and DOS.  To many, its his tireless work for the marginalised peoples of Bangladesh such as the Paharis or the Ahmadiyaas that matters most.  To others, it’s his art, intricately linked with his politics.  And then there is his work on the history around the formation of Bangladesh — few things highlight the intellectual shallowness of the Sachal-Shahbag types than the way they reacted to the most detailed take down of Sarmila Bose.

Few know that Naeem is also an empirical economist.  Or was.  Or could have been an excellent one.  Consider the abstract of his honors thesis:

I will look at the factors that effect (sic) jute prices. This is important for several reasons.  Since sudden changes in the price of jute are unanticipated by the individual farmer, they are adversely affected if they produce the same amount of jute each year but suddenly receive lower prices for it. Jute prices are also important factor in Bangladesh’s development. If overall production remains stable, but prices suddenly drop, revenue fluctuates. In trying to aid the jute industry, there have been two arguments frequently repeated in Bangladesh. One is that, jute growers need to bring sudden supply shocks to a minimum. The other is that jute growers need to concentrate on developing new markets for jute, so that Polypropylene and other substitutes do not keep eroding the market. The analysis in this paper may help to isolate the more important factors effecting price variations and, therefore, point to which factors need to be concentrated on to reduce price fluctuations in the jute industry.

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Leaders

Posted in democracy, governance, institutions, politics by jrahman on August 30, 2015

If only we had the right leader….

If only Bangabandhu (or Zia) had lived….  

If only we had a Mahathir….  

I am sure you can finish the sentence with all sorts of claims about how Bangladesh would have been, or could still be, a much better place with better leadership.  Never mind the fact that all things considered, Bangladesh might actually have done more-than-okay.  To many of our chattering classes, we’re doomed because we haven’t been blessed with the right leader.

How much does leadership matter?

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Illiberal development

Posted in democracy, development, economics, governance, institutions, politics by jrahman on June 15, 2015

A few years ago, Vietnam was the rage among the Bangladeshi chatteratis who hobnobbed in the development circle.  Look how they have forged ahead under a strong, patriotic leadership, while we languish behind because of our corrupt, venal political class — that was the refrain.  Of course, anyone who knew anything reasonably detailed about both countries would have their eyebrows raised by that.  I have vague recollection of writing something for Zafar Sobhan on this, but can’t find any link anywhere.

In any case, who cares about facts in Bangladesh?

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Surviving the white crow

Posted in Bangladesh, democracy, economics, governance, macro, political economy, politics by jrahman on January 20, 2015

Nassim Nicholas Taleb popularised the term ‘black swan’ in his 2007 book.  It comes from the Latin expression rara avis in terris nigroque simillima cygno, meaning “a rare bird in the lands, very much like a black swan” — they didn’t have any black swan in Europe, and thought swans must be white.  That notion changed when the Europeans came to Australia.  Taleb pithily summarises his thesis as:

What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

In Bangladesh, perhaps we could think about ‘white crow’ events — our crows are black, we think crows must be black, but of course there are white crows Down Under.

Taleb’s work gained much popular acclaim after the 2008-09 financial crisis.  The thing about black swans / white crows, however, is that they are hard to predict ex ante.  That’s Taleb’s first attribute.  As such, for analysts and policymakers, it might seem that Taleb has little of practical value to offer.

His subsequent work seeks to address this concern.  In a widely read Foreign Affairs article*, Taleb and a co-author argues:

Thus, instead of trying in vain to predict such “Black Swan” events, it’s much more fruitful to focus on how systems can handle disorder—in other words, to study how fragile they are. Although one cannot predict what events will befall a country, one can predict how events will affect a country. Some political systems can sustain an extraordinary amount of stress, while others fall apart at the onset of the slightest trouble. The good news is that it’s possible to tell which are which by relying on the theory of fragility.

…..

For countries, fragility has five principal sources: a centralized governing system, an undiversified economy, excessive debt and leverage, a lack of political variability, and no history of surviving past shocks.

How does Bangladesh look through the prism of Taleb’s theory?  I’d argue we should be at least concerned about the possibility of things falling apart, though there are also things to be hopeful about.

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Books

Some time ago, there was a facebook meme about 10 books:

List 10 books that have stayed with you in some way. Don’t take more than a few minutes and do not think too hard. They do not have to be the great works of literature, just the ones that have affected you in some way. Tag 10 friends and me so I can see your list.

Over the fold, for archival purposes, are two lists — one general, the other economics related.

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