IndiaSpend ResearchWire - June 25


Sorry I disappeared. Not unlike most others, I was overwhelmed and for a while it didn’t seem like I’d get to the other side. I also worried if it would sound tone deaf to start talking about the economy and evidence while the world was on fire.

But the best—and the worst—part about life is that it goes on.

So, here I am. In the hope that you’ll find this useful, and I’ll catch you at a time when you’re finally ready to look at something beyond oxygen, hospital beds, and pointless losses of those you held dear. 

In this edition, we discuss the role of services in India’s growth story, the fall-outs of criminalising sex work, what citizenship means in our globalised world, the ‘best’ way to address the learning crisis, and Econ 101 from two Nobel laureates.

If you have missed any of our earlier editions, you can read them here.

Service-Led or Service-Biased?

India’s per capita income grew by a factor of almost three between 1987 and 2011. At the same time, the share of agriculture in employment declined substantially, manufacturing employment was stagnant, and the service sector absorbed most of the workforce. Does that mean services drove India’s growth in this period?

Structural Change In Indian Employment, 1987-2011

If that’s true, it flies in the face of the widely held belief that manufacturing is indispensable for growth. It was necessary for the West, it was necessary for the East Asian miracle, and it is necessary for India. Or is it?

This is the question that Tianyu Fan, Michael Peters, and Fabrizio Zilibotti investigate in their recent paper and find that India’s growth between 1987 and 2011 was indeed service-led (i.e. services caused the growth via rising productivity) and not service-biased (i.e. the expansion in services was a consequence of growth and rising incomes—you spend more in the retail sector because your income from other sources grew).

However, this growth and its benefits were “highly skewed” and accrued mainly to those in high-income households in urban areas.

This shouldn’t surprise, given the level of skills most service-sector jobs require, or the fact that their customers are more likely to be found in cities.

I’m still pining for manufacturing to give us the jobs-intensive growth that India needs. You can read a blog on the paper here.

The cops can’t solve this one

Research by Lisa Cameron, Jennifer Seager and Manisha Shah confirms what you’d think intuitively, if you really thought about it.

Criminalising sex work does not benefit sex workers. 

Using data from Indonesia, their paper finds that while criminalising sex work did shrink the market in the short term, it also reduced condom availability and use, increased sexually-transmitted infections (STIs) (58%!), and decreased income for women who left sex work. 

They could no longer meet their children’s school expenses, who were in turn more likely to begin working to supplement household income.

But what about the long term? Additional data collected five years after criminalisation show that the market rebounds, with the total number of sex workers more or less unchanged. The increase in STIs—including HIV infections—is also likely to spread to the wider population, creating a public health crisis.

But if low condom use is what is causing this havoc, how about we criminalise sex work and provide condoms at the same time? Great idea. I’ll let you figure out what’s wrong with it. 

You can read the paper here, the blog here, and listen to the podcast here.

Considering moving to Canada, anyone?

Read this fascinating Branko Milanovic piece on citizenship and what it means in our times. He identifies three facets of being a citizen: political participation (voting), being “grounded” in a country (earning and spending most of your income there), and the right to state-funded welfare (pensions, unemployment benefits etc.). 

Milanovic argues that in a world with massive income differences between countries, the third facet earns you a “rent” or a “penalty” depending on where you live. 

“Two otherwise identical citizens of France and Mali will have entirely different sets of income-generating rights which stem from their citizenships alone.”

This “citizenship premium” applies to sources of income more generally too. 

“..our French and Malian citizens can be equally educated, experienced, and hard-working, but their wages will differ by a factor of 5 to 1, or even more, simply because one of them works in a rich and another in a poor country.”

As more and more people move to other countries to work and earn, and voluntary political participation declines (voter turnouts), the first two pillars of citizenship wither away and citizenship is “effectively reduced” to financial rents

When countries sell citizenship, it is these rents that they are selling.

Read also this excellent piece by Dani Rodrik on whether it is better to be poor in a rich country or rich in a poor country.

And if the term ‘rent’ in the note above is throwing you off, read this on what economists mean when they talk about rent—it’s not what you think!

Everything works, but what works best?

Teacher training is key, poor administration holds back public schools, teach at the right level, give the girls a bicycle, give the kids a laptop, new toilets, fans, mid-day meals—there are as many solutions to solving the learning crisis as there are experts. 

But if you’re a policy maker in a low-income country with only so much money or time to fix this problem, which of these should you pick? What will be most cost-effective—or as they say, give you the maximum bang for your buck? 

The Global Education Evidence Advisory Panel is here to answer exactly this question. Comprised of leading education experts from around the world, the Panel’s mandate is “to provide succinct, usable, and policy-focused recommendations to support policymakers’ decision-making on education investments in low- and middle-income countries.

They group various educational interventions into four categories based on the strength and credibility the evidence backing them; and tell you what works and in what context

I am not going to attempt to summarise this one except to tell you that most politician favourites are definite Bad Buys

I recommend you read the report. It is rich in insight, very well written, and indispensable if you work in education in low and middle income countries.

Nerd Gold

If you’d like to learn some economics—but will only listen when at least two Nobel laureates talk—you’re in for a treat. The Paris School of Economics hosted a 10-part introductory online course by Abhijeet Banerjee and Esther Duflo recently and the videos and presentations can be found here

The lectures cover a range of topics including racism, climate change, inequality, Covid-19, and China, are nearly 2 hours each—and should keep you busy for the next few weekends, since you’re (hopefully!) home any way.

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Amee Misra
Contributing Editor, IndiaSpend
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