Which African countries have the highest income tax rates?

Mark Anderson recently shared a link to an interesting map of tax rates on the average income for each country in Africa.  The original map is from an international relocation site called MoveHub.  I’m guessing this is about nominal tax rates and not effective tax collected.

Africa taxes

Which countries surprise you?  I for one would not have expected that Rwanda’s tax rates are higher than either Burundi’s or Uganda’s.

 

Malawi’s missing economic growth

Lise Rakner, who’s visiting Berkeley from the University of Bergen for the year, recently gave an interesting talk on how competitive elections haven’t done much to improve development outcomes in Malawi.  As a rough measure of this, I compared Malawi’s economic growth since the mid-1980s to its neighbors – Mozambique, Tanzania and Zambia.

GDP Per Cap(Data from the World Bank, via the Google Public Data Explorer. The graph looks different depending on whether you use current dollars or a PPP adjustment, but doesn’t change the fact that Malawi hasn’t grown as fast as the other two since 2000.)

I asked Lise what she attributed these divergent outcomes to, and her hypothesis was natural resources.  This clearly accounts for Zambia’s higher GDP, but doesn’t explain why every country except Malawi saw a steady increase in GDP since 2000.

All four of these countries are considered “partially free” by Freedom House, so it’s not clear that the political environment is substantially worse in Malawi than elsewhere.  They also looked very similar on the World Governance Indicators’ measures of government effectiveness, regulatory quality and rule of law in 2012.  (Look at the error bars on the estimates – they’re all overlapping.)

WGI(Data from WGI.  I didn’t include data from 2000 or earlier to keep the graph easy to read, but they looked fairly similar at that point as well.)

So what’s going on?  I don’t know Malawi at all, so any explanation would be appreciated!

Late nights at the “market of the unsold”

This article by Guillaume Iyenda on the lives of street vendors in Kinshasa’s informal economy is nearly a decade old now, but it doesn’t seem like things have changed that much:

Our research showed that the highest diversity of sales took place between 10 and 12 in the morning. As many households consume only one meal a day, people prefer to do their shopping at this time and then cook a meal that is eaten between 4 and 5 p.m. In the late afternoon, sales are high in what is locally called the wenze ya bitula, the “market of the unsold”. Here, people generally sell all their perishable goods, which they are unable to keep from one day to the next because they lack freezers. As a result, these goods are sold at half price or less. Shoppers who most frequently use these markets are those who consume their one daily meal between 8 and 10 p.m.; most of them have to wait for the main income earner to return from work, bringing back the daily money for the food shopping.

Interesting throughout.  He also has a related paper [PDF] on how street food preparation is a primary source of income for many women in Kinshasa whose husbands are disabled or unemployed.

Data on conflict and governance

Just wanted to point out that I’ve been listing links to datasets on conflict and governance on the righthand sidebar of the blog’s home page.  If you read the blog in an RSS reader or just click on links to specific posts, you may not have seen this.  Right now it’s at 24 links and counting, ranging from large dataverses (Harvard, World Bank) to mid-size databases (AidData, PRIO Armed Conflict Data, Yale ISPS,) replication datasets for individual papers (Mapping Migration in the DRC, Non-State Actor Data).

If you’re a Stata user, you may also be interested in the -wbopendata- module, which allows you to download World Bank data directly from Stata.

Globalization from below in wax print fabrics

Globalization is often portrayed as something that is imposed on people in Africa, not as a process which they can seek to mediate or even actively participate in.  Nina Sylvanus has a piece on Togolese imports of Chinese-made wax print fabrics (gated) in the April edition of African Studies Review which challenges this narrative:

[Fabric trader Antoinette] Mensah’s first experiences with the Chinese were in 1995. She had brought a set of samples, mostly non–wax prints, to Bangkok, and she wished to reproduce them as economically as possible. She met a Thai entrepreneur who introduced her to a colleague in Hong Kong who was the head of several textile manufacturing units. She worked with this Chinese manufacturer in Hong Kong for several weeks, and recalls his many misconceptions about African tastes. She had to point out repeatedly, for example, that her concern for her profit margin did not mean that she would accept goods that were shoddy or cheap…  [The] fabrics met with immediate success [in Togo]… [However, by] 1996, she was confronted with a … challenge: a group of Togolese traders had her prints reproduced in India and copies of [her] fabrics entered the market.

Over at Living Anthropologically, Jason Antrosio makes a similar point that 21st-century globalization can only amaze us if we forget the past.

Links of the day

  1. Stability, the International Journal of Security and Development, is a new open-access journal which aims to quickly get relevant academic research to policymakers.
  2. Tom Murphy points out that cancer kills many more people in the developing world each year than does HIV, and Think Africa Press writes that the severe lack of opiates in Africa makes palliative care for cancer victims quite difficult.
  3. Must African presidential aspirants go to prison before they take higher office? (In French)
  4. Videos of cash transfer recipients in Kenya and Mozambique telling their stories in their own words.
  5. A new RCT questions the external validity of RCT-proven results (a political economy story about implementing organizations), and a study from Brazil finds that rainfall fluctuations during pregnancy are associated with changes in infant health outcomes, calling the use of rainfall as an instrument for just about everything into question.

A different look at global income inequality

Something that has long struck me about modern discourses on international development is the idea that poverty is somehow shocking, an aberrance in our age of wealth.  It’s not!  Plenty of people in the world live in the way that humans have lived for most of history.  If anything, it is the wealth of the developed West that is profoundly and ahistorically abnormal.

Worldmapper has some good maps of population and wealth through history that offer a bit of perspective on this topic.  Data for year 1 CE was taken from Angus Maddison’s historical estimates of the world economy.  Check out these maps of estimated population and wealth at this time:

Population, 1 CE (source)

Wealth, 1 CE (source)

You’ll note that the maps are virtually identical, reflecting the facts that per capita GDP (imputed to modern territories, as these states obviously didn’t exist in 1 CE) varied extremely little around the world.  Maddison has estimated it at an average of $445 annually per person.

Now check out population and wealth in 2000:

Population, 2000 CE (source)

Wealth, 2002 CE (source)

Hello disparities!  Latin America is the only region where wealth appears to have grown roughly commensurately with population.  The US, Europe and Japan, of course, are looking a bit bloated, whilst most of sub-Saharan Africa appears to be doing worse (relative to the rest of the world) than it was 2000 years ago.  Average global per capita GDP in 2000 was about $5200, meaning that even the massive population growth of the last two millennia has not prevented the world’s citizens from growing (on average) more than ten times as rich as they were in 1 CE.

It should go without saying that the conclusions one can actually draw from a set of maps drawn with imputed data is limited.  However, I still find it useful to have a reminder that we shouldn’t assume the normalcy or inevitability of the world as we see it today.

Development aid in context

I’ve just started More Than Good Intentions, the new book on impact assessment in international development by Dean Karlan* & Jacob Appel, and was struck by a figure given in their introduction: US$2.3 trillion has been spent on development aid over the past 50 years.  (They don’t specify how this figure was constructed, or whether it’s in nominal or constant dollars.  However, Easterly cites the same figure elsewhere, so I’m going to run with it for the moment.)  K&A mention this in the context of arguments about development effectiveness, with the usual gloss – the question of how that much money could have failed to spark development.  Reading this now, however, I’d sooner ask the opposite question of why anyone might assume that such a trivial sum could suffice to materially transform large swathes of the world.

Think about it: US GDP in 2009 was $14 trillion in nominal terms.  In a single year, the wealthiest country in the world produces up to 6 times the value of all the money spent on aid over the last 50 years.  To put it in per capita terms, US per capita GDP in the same year was $45,989 in nominal dollars.  Let’s assume that the $2.3 trillion in aid was spent equally over those 50 years, for approximately $46 billion in aid per year.  Let’s assume as well that this aid went exclusively to the bottom billion during each of those years.  That leaves us with about $46 per person per year over 50 years – about a month and a half of subsistence at an average of $1 a day.**

This is a highly stylized and inevitably inaccurate description of how aid funding is spent, but I found it useful to put these numbers into context.  Why should we expect that a sum like $46 per person per year, no matter how effectively spent, might successfully pull nations out of poverty?  Why should we expect this paltry ammunition to succeed against the array of historically and politically contingent reasons why countries find themselves unable to grow or to equitably distribute the benefits of growth?

Of course, this isn’t actually an argument against aid, or improving aid effectiveness.  The fact that it isn’t sufficient to raise all impoverished people out of poverty doesn’t mean that the limited but real benefits that it can provide – like improving access to healthcare or education – are suddenly worthless.  And certainly almost everyone in the development community sees aid as necessary yet insufficient for development.  However, to echo Fukuyama’s critique of the lack of historical context in recent political science work (which you can read in my notes [PDF] from his recent talk at SAIS), I find it a bit troubling that we as development practitioners are still quite so focused on the causal link between aid and development, sometimes at the expense of broader thought about how countries develop and why.  As a commentator at the Fukuyama talk said, much development work feels like it’s “trying to do history in a hurry” – and with insufficient tools at that.  Alongside rigorous evaluation of the type K&A advocate, I’d love to see a stronger understanding of historical contingency & context in discourse on development.

* I worked on one of Dean’s projects with IPA, and he generously sent me a galley of the book for free.

** For the sticklers on research methods, yes, I know that nominal & real dollar amounts aren’t directly comparable; that aid hasn’t gone to a tidy billion people per year for exactly 50 years; that $1/day is actually a complex estimate of poverty [PDF]; and that living on $1/day doesn’t actually mean you get a dollar per day.  It’s a thought experiment, yo.

Resources & the ease of doing business in Africa

Afrographique is well-worth checking out for its gorgeous representations of various African statistics.  Take a look at this graph of foreign investment in 2009 (original post here):

Investment levels seem strongly correlated with natural resources (no surprise there), but don’t appear to have much relation to the ease of doing business in a country.  Nigeria, Sudan, Angola, and the Republic of Congo are all major oil exporters, even though of the 46 African countries the World Bank included in its 2011 Doing Business rankings*, they were respectively rated #17, 25, 31 and 40.  Chad, at #46, had more investment than Botswana at #3. And Somalia, a failed state that didn’t even make it into the Doing Business rankings, had only a touch less investment than vaunted reformer Rwanda.  Fascinating stuff.

*Only the current year’s data are up on the Doing Business site, and some countries have shifted rankings between 2009 (for which we have investment data) and 2011 (the business rankings).  For instance, I know that the DRC went from 183 of 183 in the world in Doing Business 2009 to a less whopping 175 of 183 in 2011.  That said, with the exception of unusually rapid reformers such as Rwanda, I doubt the investment climate has changed that significantly (with the exception of political unrest) in most countries over the last two years.

On Paul Collier, and whether statistical research should be taken seriously

I received an email from my friend Jon Stever sometime ago recounting an exchange he had with Paul Collier at a conference:

I went to see Paul Collier speak at the LSE about his penultimate book…[and] asked him to explain the usefulness of his methodology to his critics (like me) who think his results fall into one of two categories: 1. obvious tautologies or near-tautologies. or 2. those that lend themselves to potentially dangerous extrapolation (or both).

I gave two examples from his lecture that night. Here is one: He said last night that he had found that the statistical relationship between individual leadership characteristics and economic growth didn’t hold when you controlled for the fairness of elections. Moreover, he discovered that individual leadership characteristics effected growth rates only when elections were ‘dirty’ and that individual leadership characteristics did not effect growth rates when elections were ‘clean’. This is a ‘sexy’ finding and sounds interesting. But, you can rephrase this same statement into a simple tautology: leaders are not stronger than institutions (ie. leaders do not have a greater impact than institutions on growth) when institutions are stronger than leaders (ie. when institutions prevent leaders from cheating elections). Vice versa: leaders are stronger than institutions when institutions are not as strong as leaders.

Unfortunately, he completely skirted my broader invitation to explain the usefulness of his methodology. Instead he focused on the one point about leadership and muddled through an answer; he said that he thought it was an interesting finding and that he didn’t know what the data would tell him in advance etc.  I wasn’t convinced by [this response]…

[It raises] several interesting questions, in my mind, about Collier’s style and methodology:

1. Would some of Collier’s more unpalatable findings–such as that democracy doesn’t work in poorer countries–be more (or less) widely accepted if numbers were not telling the story?
2. How should the results of randomized testing be used to develop policy interventions? More specifically, would an indication of success through randomized testing in country X imply that such a policy would be useful in country Z?
3. As a public intellectual is it necessary to take extreme, contentious, or overly simplistic views? Should we, therefore, apply a massive public intellectual discount to people like Collier’s statements?

I found the first two questions especially interesting in light of the recent Microfinance Impact & Innovation conference, where a number of the same questions of narrative context and cross-country generalizability were raised.  (Tim Ogden has a thorough round-up of blog reactions to the conference here.)  Part of the ceteris paribus condition between control & treatment groups in an RCT is inevitably the broader country environment in which the experiment is taking place – and once you start making cross-country observations, well, the ceteris is no longer paribus.  Of course, Collier-style observational studies of governance at the national level can only be cross-country, and you can’t ever statistically control for all sources of variation between two countries.

It makes me wonder if there’s a certain level of complexity up to which either randomized or observational studies can in fact be generalized outside of their original contexts.  IPA folks talk a lot about the Kenya school deworming study, which showed that giving inexpensive deworming medication to schoolchildren improved educational outcomes, and I think it’s become a popular example in part because it’s so obviously generalizable to non-Kenyan contexts.  It’s rooted in biological fact.  At a slightly higher level of complexity, Erica Field had a good paper at the MII conference showing that modifying the design of Indian microfinance contracts to allow longer grace periods before repayment increased both profits & defaults among participating clients.  Assuming equivalent oversight, there seems little reason to assume that the psychological & financial aspects of a grace period might not produce similar results if implemented in Latin America or Africa.  But a country is a unit of observation that’s orders of magnitude larger and more complex than a single borrower, and it’s perhaps unsurprising that the observed nature of governance across countries is too variable, too path-dependent, to allow such cleanly identifiable relationships to exist.