evidence-based policy making in the tropics: are developing...
TRANSCRIPT
Evidence-basedpolicymakinginthe
tropics:aredevelopingcountries
different?
StephenHowes,AshleeBetteridge,
LawrenceSauseandLhawangUgyel
Abstract
Evidence-basedpolicymakinghasbeenadvocatedasmuch,ifnotmore,fordevelopingasdevelopedcountries.However,verylittleattentionhasbeengiventotheconditionsorprerequisitesforevidence-basedpolicymaking,andwhethertheseareingeneralmoreorlesslikelytoholdindevelopingcountries.Wearguethatanenvironmentconducivetoevidence-basedpolicymakingisoneinwhichtherearestrongincentivesforgoodpoliciestobeadopted,capableinstitutionstoimplementthem,awiderangeofdomainswithinwhichgoodpolicycanbeadopted,andareadysupplyofwell-developedpolicyproposals.Basedonthedevelopmentliterature,ourownexperience,andthecomparisonoftwocountries,AustraliaandPapuaNewGuinea,weconcludethattheseconditionsareallmorelikelytoexistindevelopedthandevelopingcountries.Developingcountriesontheotherhandhavetheadvantageofforeignaid.Muchforeignaidisdedicatedtothepurposeoffacilitatingevidence-basedpolicymaking.Butwearguethatatbestthisisapartialcompensationfortheotherproblemsfacedbydevelopingcountriesinstrivingtobasetheirpoliciesmorefirmlyonsoundevidence.Whilethispaperisnotacounselfordespair,itisacallforrealism.Strengtheninginstitutionsorthestructureoftheeconomyarelong-termendeavours.Butthedearthoffundingforresearchandteachingisaconstraintthatcanmorereadilybelifted,especiallywithsupportfromdonors.
DevelopmentPolicyCentreDiscussionPaper59
July2017
SERIESISSN2206-303X
Evidence-basedpolicymakinginthetropics:are
developingcountriesdifferent?
StephenHowes
AshleeBetteridge
LawrenceSause
LhawangUgyel
ProfessorStephenHowesistheDirectorandAshleeBetteridgeisProgram
ManageroftheDevelopmentPolicyCentre,CrawfordSchoolofPublicPolicy,
AustralianNationalUniversity.DrLawrenceSauseisaSeniorLecturerandDr
LhawangUgyelisaVisitingLecturerinthePublicPolicyDivisionintheSchoolof
BusinessandPublicPolicy,UniversityofPapuaNewGuinea.1
Howes,S,Betteridge,A,Sause,L&Ugyel,L2017“Evidence-basedpolicy
makinginthetropics:aredevelopingcountriesdifferent?”Development
PolicyCentreDiscussionPaper#59,CrawfordSchoolofPublicPolicy,The
AustralianNationalUniversity,Canberra.
TheDevelopmentPolicyCentreisaresearchunitattheCrawfordSchoolof
PublicPolicy,TheAustralianNationalUniversity.Thediscussionpaperseriesis
intendedtofacilitateacademicandpolicydiscussion.Useanddisseminationof
thisdiscussionpaperisencouraged;however,reproducedcopiesmaynotbe
usedforcommercialpurposes.
Theviewsexpressedindiscussionpapersarethoseoftheauthorsandshould
notbeattributedtoanyorganisationwithwhichtheauthorsmightbeaffiliated.
FormoreinformationontheDevelopmentPolicyCentre,visit
http://devpolicy.anu.edu.au
1Emailforcorrespondence:stephen.howes@anu.edu.au.ThispaperiswrittentobeachapterinaforthcomingbookonpublicpolicyeditedbyProfessorRobertBreunigandMarkFabianofCrawfordSchoolofPublicPolicy,ANU.
1
Introduction
Evidence-basedpolicymaking,whichthisvolumeseekstopromote,isasimportantfor
poorcountriesasforrichones,perhapsevenmoreso.Butcanevidence-basedpolicy
makingbemadetoworkinpoorcountries?Whatspecialchallengesdosuchcountries
faceinformulatingandimplementingevidence-basedpolicy?
Australia’sProductivityCommissiondefinesevidence-basedpolicymakingas‘aprocess
thattransparentlyusesrigorousandtestedevidenceinthedesign,implementationand
refinementofpolicytomeetdesignatedpolicyobjectives’(ProductivityCommission,
2009).The“theoryofchange”behindevidence-basedpolicyrunssomethinglikeas
follows:policymakingsuffersfromalackofgood,substantiatedproposals;therefore,if
wecanimprovethequantityandqualityofpolicyproposalswewillimprovethequality
ofpolicies.
Thisargumentseemsreasonable,butincomplete.Onecanthinkofnumerous
constraintsontheadoptionofgoodpolicies,ofwhichascarcityofgoodproposalsis
onlyone.Thoseinapositiontomakegoodpolicymaylacktheincentivetodoso.And
evenifthesupplyofproposalsisthebindingconstraint,relaxingthatconstraintmight
bedifficult.Thesearetheissuesweexploreinthispaper.
Intheliterature,evidence-basedpolicymakinghasbeenadvocatedasmuch,ifnot
more,fordevelopingasdevelopedcountries.Amongitschampionshavebeen
multilateralinstitutionssuchastheWorldBank,whichareactiveindeveloping
countries.Aspecialareaoffocushasbeenpolicyevaluation,withthepromotionof
randomizedcontroltrialsasatoolthatcouldbetransformationalfordevelopment
policy(DufloandKremer,2008).
However,verylittleattentionhasbeengiventotheconditionsorprerequisitesfor
evidence-basedpolicymaking,andwhethertheseareingeneralmoreorlesslikelyto
holdindevelopingcountries.Ourattempttoexaminethechallengesfacingevidence-
basedpolicymakingindevelopingcountriesdrawsonthedevelopmentliterature,on
ourownexperience,and,inparticularandforconcreteness,oncomparisonsbetween
AustraliaandPapuaNewGuinea(PNG),twocountriestheauthorscollectivelyknow
2
well.Thesetwoneighboursmakeforusefulcomparisonsastheyare,despitetheir
geographicalproximity,verydifferent.Ifwerankallcountriesoftheworldforwhich
dataisavailable,wecanseethatAustraliaisacountryinwhichthemortalityrateis
verylowandincomepercapitaveryhigh.InPNGthissituationisreversed(Figure1).
Putsimplybutaccurately,AustraliaisadevelopedorrichcountryandPNGisa
developingorpoorcountry.
Figure1:InfantmortalityrateandGNIpercapita,AustraliaandPNGcompared
withothernationsoftheworld
Sourcesandnotes:WorldDevelopmentIndicators.Inthisandsubsequentgraphs,PNGisrepresentedbytheredline;
Australiabytheyellowone.
Thetwocountriesarealsoondifferentgrowthtrajectories.PapuaNewGuineaisa
resourcedependenteconomy,and,forsucheconomies,GDPcanbeaparticularly
misleadingindicatorofeconomicwelfare.Abetterindicatorisnon-resourceGDP,that
is,thedomesticoutputofthenon-miningandnon-petroleumsectors.(Theargumentis
thatwhateverbenefitsofminingandpetroleumprojectsarecapturedbyPNGare
reflectedinthenon-resourcesectorthroughspillovereffects,inparticularconstruction
andgovernmentrevenue.)Non-resourceGDPpercapitaisaboutthesametodayinPNG
3
asitwasshortlyafterindependence,in1980.Bycontrast,Australia’sGDPpercapitais
almosttwiceashighnowasitwasthen.
Figure2:IncomepercapitainAustraliaandPNG
Sourceandnotes:AustraliandatafromWorldDevelopmentIndicators;PNGdatacompiledbyPaulFlanaganfrom
varioussources.Datainconstant,localcurrencyprices.AustraliandataisGDPpercapitaandPNGdataisnon-resource
GDPpercapita(whichisappropriategiventhelargeshareoftheresourcessectorinthePNGeconomy).
Ofcourse,oneshouldbewaryofgeneralizationsbasedoncomparisonsbetweentwo
countriesoreventwocategoriesofcountries.Developingcountriesdifferfromeach
other,andinmanycasesitisbettertothinkofcountriesasfacingvariousdegreesof
challenge,ratherthaneitherfacingachallengeornot.Nevertheless,wedothink
developingcountriesaredifferent,andthatcarefulscrutinyofthechallengestheyface
whenitcomestoevidence-basedpolicymakingwillpaydividends.
Ourdiscussionandthestructureofourpaperarebasedaroundfourdifferencesrelating
toinstitutions,policyoptions,researchcapacityandforeignaid.
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InstitutionsAsdefinedbyDouglasNorth,institutionsare‘therulesofthegameinasocietyor,more
formally,arethehumanlydevisedconstraintsthatshapehumaninteraction’(North,
1990,p.3).Ingeneral,poorcountrieshaveweakandimmatureinstitutions.Whilewe
wouldsubscribetothenoworthodoxviewthatthequalityofinstitutionsisa,ifnotthe,
criticaldeterminantofeconomicperformance(AcemogluandRobinson,2012),allthat
isneededforthepurposesofthissectionisanacceptanceofthestrongcorrelation
betweenthetwo:richercountriesgenerallyhavebetterinstitutions.
WeillustratethisstylizedfactusingourcomparisonofAustraliaandPNG,and2015
WorldGovernanceIndicatorsdataon‘governmenteffectiveness’.Australiaisrankedin
thetop10percentofcountrieswhenitcomestogovernmenteffectiveness;PNGinthe
bottom30percent.
Figure3:Percentilerankingforgovernmenteffectiveness,AustraliaandPNG
(higherisbetter)
Source:WorldGovernanceIndicators
92.3
29.8
0
20
40
60
80
100
AUS PNG
5
Moregenerally,Figure4showsthestrongcross-countrycorrelationbetween
governmenteffectivenessandpercapitaincome.
Figure4:Thecorrelationacrosscountriesbetweengovernmenteffectivenessand
incomepercapita
Sourceandnotes:WorldDevelopmentIndicators.Thereddottedlineisatrendline.Thegovernmenteffectivenessscoreis
apercentileranking.
Thepresenceofweakinstitutionsmakesitlesslikelythatgoodpolicieswillbeadopted,
evenifevidenceisfoundintheirfavour.Thiscanbeunderstoodinpoliticalterms.
Institutionsareanoutcomeofpolitics(AcemogluandRobinson,2012);andinstitutions
arethereforeweakifpoliticalincentivesarenotwell-alignedwiththewelfareofthe
population.Ifthereareonlyweakincentivestoimprovepolicies,thenlittle
improvementwillhappen.2Thebindingconstraintwillnotbealackofsolidevidence,
butalackofwilltotakethatevidenceanditsimplicationsseriously.Forexample,if
2Thisdiscussionraisestheinterestingquestionofthedifferencebetweenpoliciesandinstitutions.Ifinstitutionscoveralltherulesofthegame,thenpoliciesaresimplyasub-setofinstitutions.Butinstitutionsareperhapsmoresensiblythoughtofasthefundamentalrulesofasociety.Policiescanberegardedasrulesthatcanbechangedholdinginstitutionsconstant.Forexample,givingaCentralBankindependenceisaninstitutionalchange.Ifthepolicyrateofinterestischanged–bytheindependentCentralBankoranyotherpartofgovernment–thatisapolicychange.
-20
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500 5000 50000Governmen
tEffe
ctiven
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core2015
2012GDPpercapita,PPP(currentinternational$)
6
politicsareclientelisticandpoliticiansarethusmoreinterestedinprovidingprivate
goodstotheirsupporterratherthanpublicgoodstoallcitizens,thentherewillbelittle
interestinproposalstofocusmoreonpublicgoods,andevenlessonhowtosupply
publicgoodsmoreefficiently.Suchresearch,andtherecommendationsbasedonthem,
mightbeliterallyregardedasmerely“academic”.
Anotherwaytothinkaboutthisproblemisthatweakinstitutionsmanifestthemselves
inlimitedcapacity.Indeed,thisiswhatthegovernmenteffectivenessmetric,graphed
above,triestomeasure.Limitedcapacitymeansthatgovernmentsstruggletoabsorb
goodresearchandimplementpolicy.Ofcourse,thesetwoargumentsconvergesince
limitedcapacityisitselfasymptomofapoliticsthatgiveslittleweighttodevelopment
objectives.Sause(2008)hasinvestigated“thestateofpolicyadvisorycapacity”inPNG’s
centralgovernmentagencies.Hefinds“pervasiveandsystematic”problemswhichlimit
thiscapacity,arisingfrom“avarietyofinterlocking(andofteninterwoven)problems
fromboththepoliticalandtheadministrativeandorganisationaldimensionswithin
whichpolicyadviceisdevelopedanddelivered.”(Sause,2008,Abstract).
Ifinstitutionsaresoimportant,itwouldseemobvioustofocusonimprovingthem.
Indeed,atfirst,itmightseemlikeanadvantagefromareformperspectivetobeina
countrywithweakinstitutionsasitgivesrisetothepossibilityofrapidcatchup.Justas
poorcountriesdon’tneedtodeveloptheirowntechnologyinordertohaveproductivity
growth—theycaninsteadimportthetechnologyfromadvancedeconomies—soit
mightbethoughtthatpoorcountriescanshort-cutthearduousprocessofdeveloping
goodinstitutionsbyimportinginstitutionsfromadvancedeconomies.Shouldnot
researchersthenfocustheireffortsoninstitutionaldesign?Unfortunately,thislineof
argument,whilesuperficiallyconvincing,neglectsthreefactorswhichmake
institutionalimprovementfarmoredifficultthantechnologicalcatch-up.
First,itisdifficulttofindconvincingevidenceinfavourofaparticularinstitutionalset
up.Institutionsthatworkwellinonecountrymightnotworkwellinanother.AsRodrik
haswritten,‘Itiseasiertolistthefunctionsthatgoodinstitutionsperformthatitisto
describetheshapetheyshouldtake’(2008,p.100).Second,itisnotclearwhich
institutionsmakeadifference;thatis,whicharetheonesthatreallyretardprogress.
Forexample,howmuchofadragongrowthiscorruption?Thisisstillnotsomethingon
7
whichwehaveaconvincing,clear-cutanswer(compareKhan,2004withCamposetal.,
2016).Asaresult,itisnotclearwhichinstitutionsmostneedtobereformedto
promotedevelopment.Third,asalreadynoted,institutionsaretheoutcomeofpolitical
forces.Domesticpoliticalforcesnormallyonlychangeslowlyor,ifabruptly,not
necessarilyinapositivedirection.
Farfrompoorcountriesbeingabletocatch-upquicklyintermsofinstitutions,
internationalevidencesuggeststhatinmanycountriesitisnoteasytoimprove
institutions,evenifweaknessesareglaring,anditisobviouswhatneedstobedone.
Mostpoorcountriesareinwhatiscalleda‘capabilitytrap’;thatis,theirinstitutions
improveonlyglacially,ifatall(Pritchettet.al2010).Moreover,justbecauseinstitutions
ingeneralimproveonlyslowlydoesnotmeantheydonotchangeatall.Indeed,
institutionsindevelopingcountriescanchangequicklyovertime;justnotnecessarilyin
apositivedirection.
PNGandAustraliaprovideagoodexampleofthisintheareaofdecentralization:the
divisionofpowerbetweenprovincialandlocalgovernments.PNGisdividedintoabout
20provinces.Mostprovinces,exceptforthesmallest,aredividedintotwoormore
districts,foratotalof89districts.PNG’sparliamentismadeupofrepresentativesof
districtsandprovinces.Overtime,notsurprisinglygiventhebalanceofnumbers,power
andfundshaveshiftedfromprovincestodistricts.Inthe2000s,thefocuswason
gettingmorefundstoprovincesthroughprovincialfunctiongrants.Butthisdecade,
therehasbeenamassiveincreaseingrantsandresponsibilitiesdevolvedtothedistrict
level,throughmuchlargerDistrictSupportImprovementProgramgrants.Thisstateof
fluxhasmadeitverydifficulttodevelopaneffectivedecentralizationpolicy.Thepolitics
ofdecentralizationneedtobesettledfirst.Bycontrast,inAustralia,wherelocal
governmentsareunderthecontrolofstategovernments,andarenotalignedwith
electoralboundaries,thedistributionofpowersandfundsbetweenstateandlocal
governmentsiswell-settled.Changesinthisdistributionofdecentralizedpowersin
AustraliawouldbemuchmoredifficulttoachievethaninPNG,but,ontheotherhand,
inAustraliaonehasasolidinstitutionalbaseonwhichrelevantpolicyreformsinvolving
stateandlocalgovernmentscanbeandarepursued.
8
Limitedoptions
Theeconomiesofpoorcountriesaredominatedbytheinformalsector.InPNG,less
than10percentoftheworking-agepopulationisengagedintheformalsector.In
Australia,thefigureisabout60percent(Figure5).
Figure5:TheformalsectorparticipationrateinPNGandAustralia
Sourcesandnotes:ADB2014&AIHW2015.Theformalsectorparticipationratedividesthesizeoftheformalsectorby
thesizeoftheworkingagepopulation.PNGdatafrom2009/10,andAustraliandataabout2014.InAustralia,itis
assumedthateveryoneworkingisintheformalsector.
Cross-countrydataontherelativesizeoftheinformalsectorarehardtocomeby,but
wecanusetheruralpopulationasaproxysincetypicallyruralareasaremore
dominatedbyinformalactivitiesthanurbanones(ILO,2015).InFigure6,weseea
close,negativecorrelationbetweenthevariablesofinterest,inthiscaseinformality(as
proxiedbytheruralpopulationshare)andincomepercapita
0%
10%
20%
30%
40%
50%
60%
70%
PNG Australia
9
Figure6:Thecorrelationacrosscountriesbetweentheruralpopulation
share(aproxyforinformality)andincomepercapita
Source:WorldDevelopmentIndicators.
Therelativeprominenceoftheinformalsectormakesevidence-basedpolicymaking
moredifficultindevelopingcountriesforthesimplereasonthatbydefinitionthe
informalsectorislessundergovernmentcontrolorsubjecttogovernmentreach.In
essence,thegreatershareoftheinformalsectorreducestheoptionsopento
government.Iftherearefewerpolicydecisionsthatcanbemade,thescopeforusing
evidenceisaccordinglyreduced.
Thiscanbeillustratedmoreconcretelyinseveralways.First,thegreatersizeofthe
informalsectoristhefundamentalreasondevelopingcountrieshavealowertax/GDP
ratiothandevelopedones.ThisiscertainlythecaseforPNGandAustralia.Theformer
hasarevenue/GDPratioofabout15percent;forthelatteritisnearly30percent
(Figure7).
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500 5000 50000
%ofp
opulationrural2015
2012GDPpercapita,PPP(currentinternational$)
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Figure7:Revenue/GDPratiosinPNGandAustralia
Source:PNGbudgetdocuments(2017budgetestimate);AustraliandatafromAustralianGovernment2015andrelates
to2012.
Thepositivecross-correlationbetweentax/GDPandGDPpercapitaisshowninFigure
8.Thecorrelationisquiteweak.Otherfactorsarealsoclearlyimportant.Resource-rich
countriestendtohavehighertax/GDPratios,forexample.
Figure8:Thecorrelationbetweentax/GDPandincomepercapita
Source:WorldDevelopmentIndicators
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5%
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30%
revenue/GDP
PNG Australia
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Whileotherfactorsareimportant,Figure8neverthelessconfirmsthatgovernmentsin
poorcountriesgenerallyhavefewerresourcestoallocatenotonlybecausetheir
economiesarepoorer,butalsobecausetheycanlayclaimtoalessershareofthose
economies.Asaresult,thesegovernmentshavefarfewerresourceswhichcanbe
deployedinresponsetogoodpolicysuggestions.Onemightfindtheevidence,butnot
thefunds.
Thecompositionofgovernmentexpenditureandrevenueisasimportantasitssize.In
general,directtaxesandtransfersaremuchlessimportantindevelopingcountriesthan
theyareindevelopedones.Bastaglietal.(2012)confirmthatdevelopedcountriesdo
onaveragehavemuchhighertax/GDPratios.3Theyalsorevealimportantcompositional
differences.Incometaxesmakeupmorethanhalfthetotaltaxtakeindeveloped
countries,butonlyaquarterorlessinthevariousdeveloping-countryregions.
Ontheexpenditureside,Bastaglietal.(2012)alsoshowthattransfersmakeup15per
centofGDPindevelopedeconomiesbutonlyabout2percentinAsianeconomiesand1
percentinsub-SaharanAfrica.Itisnotthattargetedtransfersareimpossiblein
developingcountries.Proxyindicatorslikealackofconsumerdurablescanbeused,as
inIndiaforexample,toassesswhetherahouseholdispoorandtherebyinstitute
targetedcashorothertransfersprograms.Buttargetedtransfersarecertainlymore
difficulttomakeindevelopingcountries.Forexample,schemesofemployment
insurancearesimplyimpossibletoimplementindevelopingcountries,sinceinformal
employmentisnon-verifiable.
ThecontrastcancertainlybeseeninthecaseofPNGandAustralia.Bothcountrieshave
highlyprogressivedirecttaxsystems.InPNG,however,onlyasmallminorityare
subjecttothedirecttaxsystem,whereasinAustraliavirtuallytheentireworkforceis
covered.Australiaalsohasanextensiveandcomplexsystemofdirecttransfers,
includinguniversal,means-testedagepensions,disabilitybenefits,andunemployment
3Onaverage,developedeconomieshaveatax/GDPratioofjustover35percent.ThefourdevelopingcountryregionsofLatinAmerica,MiddleEastandNorthAfrica,AsiaandPacific,andSub-SaharanAfricaallhaveatax/GDPratioof20percentorless.
12
benefits.FormalsectoremployeesinPNGreceivesuperannuationbenefits,butnoneof
thetransferschemesevidentinAustraliaoperateinPNGatthenationallevel.4
Limitedresearchcapacity
Sofar,wehavelookedatwhatmightbethoughtofasdemandsidefactorshindering
evidence-basedpolicymakingindevelopingcountries:factorsthatreducethe
incentivesforgoodpolicy,andthatreducethepolicyoptionsopentogovernment.In
summary,theargumentofthepapersofaristhat,onthedemandside,poorinstitutions
makeitlesslikelythatgoodpolicysuggestionswillbeimplemented,andalarge
informalsectorreducesthepolicyoptionsopentogovernments.Inthissection,weturn
tosupply-sidefactorsthatmakeevidence-basedpolicymakingmoredifficultto
implement.Heretherelevantstylisedfactisthatuniversitiesandthinktanksin
developingcountriesaregenerallysmallinsizeandoflowquality.
ThecontrastbetweenrichandpoorcountriesinthisregardisshownclearlybyFigure
11,whichcomparespercapitaspendingonuniversityeducationinthetwocountries.
PNGspendsonly$6perpersononuniversityeducation;Australiaspendsmorethan
$1,000.Thisratioofmorethan100:1isfargreaterthantheratioofpercapitaincomes
whichisapproximately15:1.PNGnotonlyputsfarfewerstudentsthroughuniversities
andspendsonlyafifthofwhatAustraliadoesoneachofthem.
4Oneresource-richPNGprovince,NewIreland,operatesitsowncashtransferprogram.
13
Figure11:PercapitaandperstudentuniversityfundinginAustraliaandPNG
Sourcesandnote:Totalspendingforfourstate-owneduniversitiesinPNG(2015actuals)frombudgetdocuments
dividedbyestimatesofthestudentbodyandpopulation.ForAustralia,governmentspendingperstudentandtotal
numberofstudentsfromUniversitiesAustralia(2015),for2015withCensuspopulationestimateforthatyear.
Currentexchangerateused(universitysalariesarelowerinPNG,butthepurchasingpowerofsalariesissimilarif
nothigherinAustralia).
Comparablecross-countrydataontertiaryeducationishardtocomeby.Instead,we
canusetheshareofthelabourforcewithatertiaryeducationasaproxy(Figure12).
Thereisastrongpositivecorrelationbetweentheshareofthelabourforcewitha
tertiaryeducationandincomepercapita.
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Figure12:Thecorrelationacrosscountriesbetweentheshareofthelabourforce
withatertiaryeducation(aproxyforeducationspending)andincomepercapita
Source:WorldDevelopmentIndicators
Asmallershareofspendingontertiaryeducationwouldnotnecessarilybeaproblem
forevidence-basedpolicymakingiftheeducationsectorindevelopingcountrieswas,
althoughsmall,ofhighquality.However,thisisrarelythecase.Thequantityandquality
oftertiaryeducationmovetogether,atleasttoacertainthreshold.Educationspending
perstudentistypicallymuchlowerindevelopingcountriesthanindevelopedones,as
thecomparisonbetweenPNGandAustraliaillustrates(seethesecondgraphinFigure
11above).Partlyasaresultoffewerresources,universitiesindevelopingcountries
haveagreaterfocusonteaching,andalesserfocusonresearch—including,therefore,a
lesserfocusonresearchintopolicyquestions.
Agoodmeasureofthequalityoftertiaryeducationinacountryistherankingofits
universities.Whilethereisnodoubtthattherankingbyqualityofuniversitiesisafar
fromperfectscience,itwouldbeamistaketowriteoffanysuchrankingasa
meaninglessexercise.TwoofthemostpopularandcomprehensiverankingsaretheQS
WorldUniversityRankingsandtheTimesHigherEducationWorldUniversityRankings.
AsTable1belowshows,only4ofthetop100universities(accordingtotheQSWorld
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50
60
500 5000 50000Percen
tagelabo
urfo
rrcewith
tertiaryedu
catio
n
GDPpercapita2012(PPPUSD,currentprices)
15
UniversityRankings)or2(accordingtotheTimesHigherEducationWorldUniversity
Rankings)arelocatedinadevelopingcountry,namely,China.5
Table1:Themostrepresentedcountriesintwotop-100worlduniversity
rankings
Countries QSWorldUniversitiesRankings2016-2017
TimesHigherEducationWorldUniversityRankings
2016-2017
UnitedStates 32 41
UnitedKingdom 18 12
Germany 4 9
TheNetherlands 2 8
Australia 6 6
Japan 5 2
Canada 4 3
China 4 2
HongKong 4 3
Source:Bridgestock2016
Economicsisonedisciplinewidelyregardedascriticalforevidence-basedpolicy
making.AqualitativecomparisonbetweenAustraliaandPNGisusefulinthiscontext.
ThereisonlyoneuniversitywherestudentscanstudyeconomicsinPNG,namelythe
UniversityofPapuaNewGuinea(UPNG).InAustralia,therearedozens.AtUPNG,in
2014,therewereonlytwolecturersintheEconomicsDivision.Thesituationhas
5WhileHongKongispartofChina,itstillfunctionsseparately,andcertainlyinthiscontextisbestthoughtofasadevelopedeconomy,ratherthanaspartofalargerdevelopingcountry.
16
improvedslightlysincethenduetotheprovisionofvisitinglecturersfromThe
AustralianNationalUniversity(ANU)(withfundingfromtheAustralianaidprogram),
butatthetimeofwritingthereareonlyfourlecturersintheEconomicsDivision.Any
oneofthedozensofuniversitiesteachingeconomicsinAustraliawouldhaveastronger
faculty.LittleresearchiscarriedoutbytheUPNGEconomicsDivision,thoughagain
therehasbeensomeimprovementinrecentyearsasaresultoftheANUpartnership.
Ofcourse,universitiesarenottheonlyplacewhereeconomicorpolicy-relatedresearch
iscarriedout.PapuaNewGuineaisfortunatetohavetwothinktanks,theNational
ResearchInstitute(NRI),whichisgovernmentfunded,andtheInstituteofNational
Affairs(INA),whichisfundedbytheprivatesector.BoththeNRIandINAmakea
valuablecontributiontoeconomicresearchinPNG.Buttheyarerelativelysmall
institutions,andthinlystretched.Australiahasamuchmorerobustnetworkofthink
tanks,bothgovernment-funded,suchastheProductivityCommission,andnon-
government-funded,suchastheGrattanInstitute,theCentreforIndependentStudies,
andtheAustraliaInstitute,tonameonlyafew.
Thelimitationspointedtointhissectionnotonlyactasconstraintstothesupplyof
evidenceforpolicy-makingindevelopingcountries.Theyalsolimitcontestability:the
abilityofthinktanksanduniversitiestoquestionofficialwisdom,andsuggestan
alternativenarrative.Thisinturnleadstoagreaterprospectofpolicycaptureofthe
dominantpublicsectorinstitutions,suchasTheTreasuryandtheCentralBank,andan
increasedlikelihoodthatevidence,evenifitisavailabletosupportanalternativepolicy
position,willbeignoredifitispoliticallyinconvenient.PNGhasrecentlyseenmajor
changesinitsexchangerateregimeawayfromafloatingtowardsafixedexchangerate
(IMF2016).Thishasnotgoneunnoticed,butnorhasitbeenaccompaniedbythesortof
livelydebateonewouldexpectifasimilarseismicshiftineconomicpolicyoccurredin,
say,Australia.
17
Foreignaid
Sofarwehaveconsideredvariousdisadvantagesthatdevelopingcountrieshaveto
contendwithinrelationtopursuingthedesideratumofevidence-basedpolicymaking.
Butdevelopingcountriesalsohaveanadvantage.Theyreceiveforeignaid,andmuch
foreignaidisintendedtohelpwithbetterpolicymaking.Towhatextentdoesthis
actuallycompensatefortheotherdifficulties?
Foreignaidisstillsignificantforlowincomeand,toalesserextent,lower-middle
incomecountries.In2012,lowincomecountriesonaveragereceivedaidworth9.9per
centoftheirGDP.Lower-middleincomecountriesreceivedaidworthonaverage0.8
percentoftheirGDP.Forupper-middleincomecountries,however,theratiowasonly
0.1percent.Developedcountriesreceivenoaid,thoughtheydooccasionallyreceive
internationalassistancefollowingdisastersandfinancialcrises.PNGreceivesforeign
aidworthabout5percentofitsGDP.Wecancertainlyconcludethataidisasignificant
volumeoffundsforthepoorerofthedevelopingcountries,thoughitalsoneedstobe
recalledthatmostoftheworld’scountriesarenowadaysmiddleratherthanlow
income.
Aidisprovidedforawholevarietyofreasonsandcauses.Aidisgivenasdisasterrelief,
foodaid,budgetsupportanddebtrelief.Mostaidisgiventofundsectoralprojects,
whethertobuildanewroad,ortostrengthenteachertraining.
Anotherimportantformofaidistechnicalassistanceorcooperation.Onaverage,about
onequarterofallaidisgivenastechnicalassistance.Australiaingeneralismore
focusedontechnicalassistancethanthis.Attimes,asmuchas60percentofAustralian
aidhasbeengivenastechnicalassistance,withthecurrentfiguresittingaround40per
cent.Technicalassistanceisitselfgivenforarangeofreasons,butingeneralitisgiven
tostrengtheninstitutionsandimprovepolicymaking.Indeed,technicalassistancecan
beviewedasthepublicsectorequivalentofforeigndirectinvestment.Justasforeign
directinvestmentisatransfermechanismbywhichdevelopingcountriescanaccess
advancedindustrialtechnology,sotechnicalassistanceisamechanismbywhich
developingcountriescanaccessdeveloped-countrypublic-sectorprocessesand
18
reforms.Perhapsthemosttypicaluseoftechnicalassistanceistheprovisionofadvisers
togovernmentdepartmentstoimprovecapacityforpolicyreformandimplementation.
Anotherformofaidexplicitlydirectedatimprovingpolicyisbudgetsupportgivenon
thebasisofreformconditions.Lessthantenpercentofaidisgivenasbudgetsupport.
Evaluationsofbudgetsupportvarywidely,butthemorepositiveonesclaimonlya
modestroleforit(Mosleyetal.1995).
Towhatextentisaidabletocompensateforthedisadvantagesthatdeveloping
countriesface?Someclaimthataidinfactisanegativeforthecountriesthatreceiveit.
AngusDeatonamongothersclaimsthataidunderminesinstitutions(Deaton2013).
Evidenceforthisclaimislimitedthough,andinfactthereisevidenceintheopposite
direction(summarizedbyWood,2016).
Whileitseemsunreasonabletoclaimthataidinfactmakesthingsworse,howmuch
doesitmakeitbetter?Therearecertainlypositiveexamplesofpolicyandinstitutional
transfer.Oneofthemisprovidedinthisbook:income-contingentloans.However,in
general,thetrackrecordofusingaidtopromotereformsislimitedifnotdisappointing
(Andrews,2013).
First,reformsaredeterminedbydomesticpolitics,andtheinfluenceofoutsiders,even
cashed-upoutsiders,isnormallylimited.
Second,OECDinstitutionsandpoliciesmaynotingeneralbeappropriatefordeveloping
countries.ThepracticethatEvans(2004)referstoas“institutionalmonocropping”may
besub-optimal.
Third,evenwhencountriesadopttherecommendedreforms,theadoptionmightbe
onlyskindeep,orinformratherthansubstance.Pritchettetal.(2010)highlightthe
phenomenonof“isomorphicmimicry”bywhichdevelopingcountriespretendtoadopt
developed-countryreformstokeepdonorshappy,butinwhichtheirunderlying
institutionsinfactdonotchange.TheWorldBank(2017,p.92)showsthatthegap
betweenformalrulesandactualpracticeisgreaterinpoorercountries.Forexample,
manydevelopingcountrieshaveadoptedanti-corruptioninstitutionswithoutmakinga
dentonthelevelofnationalcorruption(Kuria,2016).
19
Fourth,theliteraturerecommends,asaresultofthedisappointmentsassociatedwith
foreignaid,thatdonorspromotehome-grown,iterativesolutions(Andrewsetal.,
2017).Theyalsorecommendthattheylookforopportunitiesforpolitically-feasible,
incrementalreform—amorerealisticoptioncomparedtoseekingwider-ranging
institutionalchange(TheAsiaFoundation2011).Theseideassoundpromising,butthey
alsosuggestthattheroleofaidislimited,andthatatbestitisapartialratherthanfull
compensationfortheotherdifficultiesdevelopingcountriesfaceinimplementing
evidence-basedpolicy.
ThehistoryofaidtoPNGprovidesarichrangeofexperiencesthatilluminatethe
limitationsofaidinpromotingpolicyandinstitutionalreform.Aninterestingexampleis
theNationalRoadAuthority(NRA).Itwassetuptosecurefundingforroad
maintenancewithmuchencouragementandassistancefromtheAsianDevelopment
Bank.Sinceitscreationin2003,however,theNRAhasneverbeenfundedmorethan
tokenistically.Aminisculetaxof0.04Kina(about$A0.02)perlitreofpetrolprovides
nexttonofundingforit($AUD7millionin2014or1.5percentofallgovernment
spendingonroadmaintenanceandrehabilitation),andmakesitimpossibleforittoplay
anythingresemblingtheroleintendedforit(Dornan,2014,2016).
AnotherinterestingexampleistheSovereignWealthFund(SWF),whichPNGfinally
establishedin2015afterhavingagreedwithAustraliatoestablishitin2009andhaving
subsequentlyreceivedconsiderableassistancetodoso.TheestablishmentoftheSWF
wascontroversial,andPNGtooksolongtosetitupthat,bythetimeitdid,itsresource
boomwaswellandtrulyover.PerhapstheSWFwillbeofassistanceasasavings
mechanismnexttimethecountryhasaresourceboom,butsignificantquestionsraised
aboutitsdesign(Osborne2015)makeeventhisuncertain.
Amorepositiveexampleistheprovincialfunctiongrantsmentionedearlier.This
schemewasalsoestablishedwithAustralianassistanceandencouragement.The
increasedfundsthathaveflowntoPNG’sprovincesthroughtheseredesignedgrantsare
generallyreviewedasresponsivetoPNG’sneeds.Theestablishmentoftherequisite
formulaewasbasedonsignificantdomesticinput,ratherthanasimpletransplantingof
bestpractice(ODE2009).Nevertheless,evenforthispositiveexample,thereistherisk
thatgoodpolicywillbetrumpedbyinstitutionalchange.Theearlier-notedshiftin
20
PNG’sapproachtodecentralization,withitsmuchgreateremphasisondistrictsrather
thanprovinces,hasalreadyresultedinadwarfingoftheprovincialfunctiongrantsby
newdistrictgrants,andraisesseriousquestionsaboutthelong-termviabilityofthe
provincialgrants.
Conclusion
Anenvironmentconducivetoevidence-basedpolicymakingisoneinwhichthereare
strongincentivesforgoodpoliciestobeadopted,capableinstitutionstoimplement
them,awiderangeofdomainswithinwhichgoodpolicycanbeadopted,andaready
supplyofwell-developedpolicyproposals.Theseconditionsareallmorelikelytoexist
indevelopedthandevelopingcountries.Developingcountriesontheotherhandhave
theadvantageofforeignaid.Muchforeignaidisdedicatedtothepurposeoffacilitating
evidence-basedpolicymaking.Butatbestthisisapartialcompensationfortheother
problemsfacedbydevelopingcountriesinstrivingtobasetheirpoliciesmorefirmlyon
soundevidence.
Thisisnotacounselfordespair.Oneofthemostimportantstylisedfactsof
developmentisthe“growthtriangle”,whichshowsthatwhiledevelopedcountriesgrow
atslow,steadyratesoverdecades,developingcountriesshowmuchmorevariation,
withtheextentofvariationgrowingthepoorerthecountrieswereatthestartofthe
periodofanalysis(Jones&Romer2010).Mostdevelopingcountrieshavethepotential
forrapidgrowthbasedontechnologicalcatch-up,butonlysomeofthemareableto
realisethatpotential.Thosethatdorealisethatpotentialareingeneralthosewithgood
institutions,oratleastthosethathaveapoliticaldynamicthatsupportsthe
developmentofbetterinstitutions.Astheydevelop,theconstraintsaroundevidence-
basedpolicymakingareweakened,theirinstitutionsimprove(orwerealreadygood
enoughtostartwith),theireconomiesformalise,wideningthegovernment’soptions,
andtheyhavemorefundstospendonuniversitiesandthinktank.Clearlynotall
countriesfindthemselvesinsuchavirtuouscircle.Thoseexcludedfromitarethose
withpoorinstitutionsandwithoutapoliticaldynamicthatwillimproveinstitutional
qualityovertime.Implementingevidence-basedpolicymakingisatoughaskinsuch
countries.
21
Whilethispaperisnotacounselfordespair,itisacallforrealism.Therearenoeasy
answers,andevidence-basedpolicymakingofcourseremainsanadmirableaspiration.
Itjustmaybealongwayaway.
Whatcanbedonetopromoteevidence-basedpolicymakinginpoorcountriesgiventhe
constraintsonthem?OnepromisingexampleinthisregardistheAfricanEconomic
ResearchConsortium.JimAdams,formerWorldBankVicePresident,haswrittenas
followsconcerningtheAERC:
Inthemid-1980swhenthecallforstructuraladjustmentwasatitspeakin
Africa,aclearsenseemergedthattoomuchofthedebateonreformand
adjustmentwasdominatedbydonors.Thelocalcapacityinvolvedwasbothtoo
smallandoflimiteddepth.Theneartotalabsenceofsolideconomic
analysisemergingfromwithinthecontinentwasanobviousgaprequiring
action.Therewasaparallelconcernaboutthequalityoftheeconomictraining
withintheregion.Indirectresponse,aneffortwasledbyanumberofdonorsto
putinplacesupportfordevelopinganetworkofqualifiedpolicy-focused
economists.
CalledtheAfricanEconomicResearchConsortium(AERC),itbeganoperationsin
1988.Fromitsinitiation,theAERCincludedaprogramoffundingandtrainingyoung
economistsintheareaofeconomicpolicy,withastrongfocusonqualityandregular
workshopstoexchangeideas.Today,governmentsacrossAfricaseeAERC-fundedwork
ascentraltotheirpolicy-makingprocesses.Theyarenolongertotallydependenton
outsideresearchersanddonors.AERCgraduatesareincreasinglytakingonsenior
policypositionsacrossAfrica.TheAERCitselfhasexpandedfromtheoriginalthree
countriesinwhichitbegantocovertheentirecontinent.(Adams2013)
Adamsconcludesthat‘TheAERCmodelcan’tbedirectlycopied,butitsaccumulationof
25yearsofsuccessfulexperiencedoesprovidesomeusefulguidancefor…donorson
howtogoaboutthecriticaltaskofbuildingtheeconomiccapacityrequiredtopromote
andsustaineconomicreform’(Adams2013).
Whileeconomicsisimportant,onemightreasonablygeneralisethisadvicetocover
thosedisciplinesrelevanttopublicpolicymorebroadly,includingpoliticalscience,and
22
thestudyofpublicpolicyitself.Ifwewantmoreevidence-basedpolicymakinginthe
tropics,donorsandgovernmentsalikeshoulddomoretosupportevidence-gatherers
byinvestinginlocaluniversitiesandthinktanks.
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