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Lecture_8_2010_M - Sachs McArthur Schmidt-Traub Kruk...

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Intermediate Macroeconomics Bruce Preston February 11, 2010 Poverty Traps Central to modern growth theory: The relationship between instritutions and growth A question of causality Many argue that good institutions lead to growth Sachs: good instutions may be present and still not growth Poverty traps Sachs, McArthur, Schmidt-Traub, Kruk, Bahadur, Faye, and McCord 119 Table 2. Governance Ratings and Household Consumption in Tropical Sub-Saharan Africa Rating Household based on Rating final World Bank based on consumption governance Transparency Freedom expenditure indicators, International House per capita, 2000 Country 2002 a index, 2003 a rating, 2003 (1980 = 100) Benin Good n.a. Free 98.9 Burkina Faso Good n.a. Partly free 111.0 Ghana Good Average Free 92.8 Madagascar Good Good Partly free 64.0 Malawi Good Good Partly free 111.2 Mali Good Good Free 95.3 Mauritania Good Good Partly free 104.8 Senegal Good Good Free 99.6 Cameroon Average Average Not free 102.5 Central African Rep. Average n.a. Partly free n.a. Chad Average n.a. Not free n.a. Congo, Rep. of Average Average n.a. 80.5 Côte d’Ivoire Average Average Not free 78.2 Eritrea Average n.a. Not free n.a. Ethiopia Average Good Partly free n.a. Guinea Average n.a. Not free n.a. Kenya Average Average Partly free 100.7 Mozambique Average Good Partly free 79.4 Niger Average n.a. Partly free n.a. Nigeria Average Average Partly free n.a. Rwanda Average n.a. Not free 83.9 Sierra Leone Average Good Partly free 43.9 Tanzania Average Good Partly free n.a. Togo Average n.a. Not free 112.4 Uganda Average Average Partly free n.a. Zambia Average Good Partly free 47.0 Angola Poor Poor Not free n.a. Burundi Poor n.a. Not free 65.0 Congo, Dem. Rep. of Poor n.a. Not free 45.1 Sudan Poor Average Not free n.a. Zimbabwe Poor Average Not free 88.4 Liberia n.a. n.a. Not free n.a. Somalia n.a. n.a. Not free n.a. Sources: Kaufmann, Kraay, and Mastruzzi (2003); Radelet (2004); authors’ calculations using data in Transparency Inter- national (2004); Freedom House (2003); World Bank (2003a). n.a., not available. a. Determined from the residuals of a regression of countries’ governance indicators or scores on income per capita (at pur- chasing power parity); countries with residuals more than 1 standard deviation above or 1 standard deviation below the predicted value are categorized as “good” or “poor,” respectively, and those with residuals within 1 standard deviation as “average.” For the first column, the World Bank governance indicators are those calculated by Kaufmann, Kraay, and Mastruzzi (2003). For the sec- ond column, Transparency International’s Corruption Perceptions Index is used, which relates to the degree of corruption in the country as perceived by business people, academics, and risk analysts and ranges between 10 (highly clean) and 0 (highly corrupt). dation instead. In Boserup’s theory, higher population density should have led to intensive cultivation, with large investments in fertilizers, water management, seed breeding, and the like. Instead soil nutrients have been depleted, with hardly any replacement by chemical fertilizers or nitrogen-
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