Why are there so many poor people in Africa and South Asia?

Shanta Devarajan

World Bank

http://africacan.worldbank.org

For the first time in 20 years, Africa’s growth is equal to that of developing countries

(except China and India)

Per capita income

-4

-2

0

2

4

6

8

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

An

nu

al c

ha

ng

e in

re

al G

DP

pe

r c

ap

ita

(%

)

Developing countries Developing countries, excluding China and India

Sub-Saharan Africa High-income countries

Africa’s growth has not brought sufficient progress on poverty and social outcomes

Number of countries that will achieve MDGs Number of population that will achieve MDGs

Source: Global Monitoring Report, 2007.

While gross primary enrollment rate is high, completion rate is low in most of countries

0

20

40

60

80

100

120

140

SouthAfrica

Botswana Nigeria Ethiopia Cameroon EquatorialGuinea

Gross primary enrollment

Completion rate

Source: WDI.

GDP growth in South Asia has been strong and accelerating

Source: World Development Indicators

Poverty is falling but inequality is rising

Source: Narayan, Ambar, et. al. 2006. “The challenge of promoting equality and inclusion in South Asian countries.” mimeo, World Bank: Washington DC.

Big gaps between enrolment and completion in primary education

Source: Schweitzer, Julian. 2006. “Human development in South Asia.” mimeo, World Bank: Washington, DC.

Immunization rates in India are low and stagnant

Measles Immunization: 12-23 Months

50

55

60

65

70

75

80

85

90

2000 2001 2002 2003 2004

Year

% Im

mu

niz

ed Bolivia

ChinaIndiaIndonesiaKenya

Source: WDI Indicators Database

I. Infrastructure in India and Africa

• Water in India

24x7 water: A pipe dream?

Source: Data collected from the water boards or utilities

per capita lpd vs. hours of supply/dayGoa

Chandigarh

Mumbai

Delhi

Patna

Ludhiana

Jodhpur

Dasuya

Dera Bassi

Paris

Jaipur

Ahmedabad

Bikaner

Bangalore

Gurdaspur

Bathinda

Bharatpur

Udaipur

Chennai 3280

105106

108123

133145

149

173184

190220

222223

240332

341

1.5 2.5 1.5

8 10

2.5 1.5

2 3

8 10

2.5 10 10

4 5

10

8

24150

Service to the poor is big business

Politics, patronage, & network servicesPOLITICIANS

EMPLOYEESUTILITY

COMPANY

CONNECTEDPOPULATION

Operational subsidiesAppointment of directors

Political favours

Artificiallydepressed

tariffs

Poorquality of

service

Over-staffing

UNCONNECTEDPOPULATION

High prices

CONTRACTORS

Untendered contracts

I. Infrastructure in India and Africa

• Water in India

• Transport corridors in Africa

SELECTED CORRIDORS

OF THE STUDY

23.5 4

5 5 5

78

11

0

2

4

6

8

10

12

14

Pakis

tan

Bra

zil

US

A

Chin

a

Weste

rn

Euro

pe –

long

dis

tance

Afr

ica-

Durb

an-

Lusaka

Afr

ica-

Lom

é -

Ouagadougou

Afr

ica –

Mom

basa

Kam

pala

Afr

ica-

Douala

-

Ndja

ménaA

vera

ge t

ransport

prices

(in U

S c

ents

per

tkm

)

Central Africa East Africa West Africa Southern Africa France

Variable costs (USD per veh-km) 1.31 0.98 1.67 1.54 0.72

Fixed costs (USD per veh-km) 0.57 0.35 0.62 0.34 0.87

Total transport costs (USD per veh-km) 1.88 1.33 2.29 1.88 1.59

Transport costs are not excessively high in Africa comparing to France for example

However, average transport prices in Africa are high in a global comparison

Corridor Gateway - Destination Price(USD/ veh-km)

Variable cost

(USD/veh- km)

Fixed cost(USD/veh- km)

Average yearly

mileage (‘000)

Profit margin

(%)

West Africa

Tema/Accra - Ouagadougou 3.53 1.54 0.66 30-40 80%

Tema/Accra - Bamako 3.93 1.67 0.62 40-50 80%

Central Africa

Douala - N’Djaména 3.19 1.31 0.57 60-70 73%

Douala - Bangui 3.78 1.21 1.08 50-60 83%

Ngaoundéré - N’Djaména 5.37 1.83 0.73 20-30 118%

Ngaoundéré - Moundou 9.71 2.49 1.55 10-20 163%

East Africa

Mombasa - Kampala 2.22 0.98 0.35 130-140 86%

Mombasa - Nairobi 2.26 0.83 0.53 90-100 66%

Southern Africa

Lusaka - Johannesburg 2.32 1.54 0.34 160-170 18%

Lusaka - Dar-es-Salaam 2.55 1.34 0.44 160-170 62%

An interesting observation: On Central Africa corridor, trucks with lower average yearly mileage

have the higher profit margins

Average transport prices (constant and current) from Mombasa to Kigali

0

50

100

150

200

250

300

35019

89

199

0

199

1

1992

1993

1994

199

5

199

6

199

7

1998

199

9

200

0

2001

2002

2003

200

4

200

5

200

6

Years

US

$/T

on

0

100

200

300

400

500

600

700

800

900

US

$/T

on

Current transport tariffs (left) Real transport tariffs - GDP deflator (right)

After liberalizationBefore liberalization

II. Agriculture in India

Agriculture value added per worker, 1990=100

90

100

110

120

130

140

150

160

170

1990 1992 1994 1996 1998 2000 2002 2004 2006

Bangladesh China India

China

Bangladesh

India

0

1

2

3

4

5

6

7

1975-79 1980-84 1985-89 1990-94 1995-99 2000-02

Perc

ent of A

g. G

DP

Subsidies

Public Investment

Public expenditures in India

III. Labor regulations in India and Sri Lanka

Employment regulations in South Asia are among the

most restrictive in the world

Source: Doing Business 2006. World Bank: Washington, DC.

“Missing middle”

India1989-90

0 10 20 30 40 50

5-9

10-49

50-99

100-199

200-499

500+

% distribution of employment

Malaysia1981

0 10 20 30 40 50

5-9

10-49

50-99

100-199

200-499

500+

% distribution of employment

Complex labor legislation and regulations

• Altogether about 45 central laws and 170 State statutes directly deal with labor market issues. Labor is a concurrent subject.

• Industrial Relations– Trade Unions Act, 1926– Industrial Disputes Act (IDA) 1947

• Working Conditions– The Factories Act, 1948– The Industrial Employment (standing orders), 1946– The Contract Labour Act, 1961

• Wages– The Payment of Wages Act, 1937– The Minimum Wages Act, 1948

• Social Security and Insurance– Workmen Compensation Act, 1923– Employee State Insurance Act, 1948– Employees Provident Funds Act, 1952

• Plus a number of state laws such as the Shops and Establishment Act

Some 533,000 Cases pending-- 28,000 for more than 10 years

Major States No. of Cases Pending No. of cases pending for

More than 10 years Assam 189 138 Bihar 5,200 566 Delhi 28,837 2,342 Gujarat 133,916 8,616 Kerala 3,450 63 Karnataka 17,457 2,924 Maharashtra 142,345 11,508 Madhya Pradesh 89,341 0 Punjab 14,784 110 Rajasthan 20,066 775 Tamil Nadu 21,713 150 Uttar Pradesh 22,539 10,303 West Bengal 2,225 283 Total ( All States & UT) 533,038 28,864

IV. Education in India and Uganda

Learning outcomes in India

Percent of Std. 2-5 children who cannot read or do sums

0

10

20

30

40

50

60

70

Public Private

Pe

rce

nt Level 2 reading

Subtraction/Division

Source: ASER 2007

All India Teacher Absence Map (Public Schools)

StateTeacher

Absence (%)Maharashtra 14.6Gujarat 17.0Madhya Pradesh 17.6Kerala 21.2Himachal Pradesh 21.2

Tamil Nadu 21.3Haryana 21.7Karnataka 21.7Orissa 23.4Rajasthan 23.7West Bengal 24.7Andhra Pradesh 25.3Uttar Pradesh 26.3Chhatisgarh 30.6Uttaranchal 32.8Assam 33.8Punjab 34.4Bihar 37.8Jharkhand 41.9Delhi -All India Weighted 24.8%

Source: Kremer, Muralidharan, Chaudhury, Hammer, and Rogers. 2004. “Teacher Absence in India.”

Public School Teachers are paid a (lot) more

• Definitions• Unadjusted Wage

is the average wage of teachers in the public and private sector

• The adjusted wage is what a 25 year old female with a bachelors degree and a 2-year teacher training course residing locally would earn in the public and private sector

1231

1619

6178

5299

02

,00

04

,00

06

,00

0S

ala

ry in

Rs.

Private Public

Unadjusted Adjusted Unadjusted Adjusted

Teacher Compensation

-400

-200

020

040

060

0D

evia

tion

from

Mea

n S

alar

y in

Rs

0 10 20 30Days Absent per Month

Private Schools Public Schools

Teacher Absenteeism and Compensation

The private sector pays more absent teachers

less

The public sector pays more absent teachers

more

Salary results are presented as“deviations from mean”. So the number

200 on the vertical axis means that the person’s salary is Rs.200 more than the average salary for the sector The figure is based on a non-parametric

plot of deviations from mean salary against the number of days absent.

Absence rate among teachers

Country Rate (percent)

Bangladesh 15

Ecuador 14

India 25

Indonesia 19

Papua New Guinea 15

Peru 11

Zambia 17

Uganda 27

Uganda: What enumerators found

V. Health in India and Chad

Distribution of Health Care Subsidies All India, 1995-6

0

5

10

15

20

25

30

35

Poorest II III IV Richest

Hospitals

Primary HealthCenters

Source: calculations based on Mahal et. al. 2001 – referred to in MTA para. 2.2.68

India 2003: Doctor absence from PHC’s

by state and reason

0

10

20

30

40

50

60

70

80

Bihar

Jhar

khan

d

Orissa

Uttara

nchal

Uttar P

rades

h

Assam

Rajas

than

Mad

hya P

rades

h

Chhatis

garh

Wes

t Ben

gal

Andhra P

rades

h

Karnat

aka

Tamil

Nadu

Mah

aras

htra

Gujara

t

Harya

na

Punjab

Official Duty

Leave

No reason

Quality is low, even when present (Delhi doctors)

0.1

.2.3

.4%

Who

ask

ed t

he r

elev

ant

ques

tion

Private MBBS Private, No MBBS Public

...And What They DoWhat They Know

% Asked (DCO) % Asked (Vignettes)

What they do is in blue, what they know is in red. MBBS doctors are (roughly) the equivalent of MDs in the US. Das and Hammer (2005)

Chad

“Although the regional administration is officially allocated 60 percent of the ministry's non-wage recurrent expenditures, the share of the resources that actually reach the regions is estimated to be only 18 percent. The health centers, which are the frontline providers and the entry point for the population, receive less than 1 percent of the ministry's non-wage recurrent expenditures.”

-- Bernard Gauthier and Waly Wane, “Leakage of public resources in the health sector : An empirical investigation of Chad,” 2008.

How to end poverty

Market failuresEfficiency & Equity

Government

failure

How to end poverty

Market failuresEfficiency & Equity

Government

failure

“It is not sufficient to contrast the imperfect adjustments of unfettered private enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any public authority will attain, or will even whole heartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure, and to personal corruption by private interest.”

--A.C. Pigou, 1920