I recently read that a panel of Canadian senators wants to shut down CIDA (the Canadian international aid agency) as it has spent $12 billion in Sub-Saharan Africa over the past 40 or so years and has nothing to show for it.  Part of the reason they’ve nothing to show for it is due to the fact that ~80% of their staff are in Ottawa rather than in the field.

However, another part of the problem could be that corruption in the countries they’re working in reduces the effectiveness of what they’re spending money on.  It turns out that this has actually been measured by two economists - Robert Hall and Charles Jones.  In 1999 they wrote a paper called “Why do some countries produce so much more output per worker than others” and showed a positive correlation between corruption and poor productivity.  In other words, rather than working on making their capital effective, people in countries like Niger spend their days trying to make sure that their capital isn’t stolen by other people.  And that’s why the productivity of a worker in the U.S. in 1988 was 35x that of a worker in Niger (to put that in perspective, what a U.S. worker produces in two weeks is more than a worker in Niger produces in a year).

They measured corruption based on indices such as Political Risk Services or Transparency International.  However, a cynic could argue that these sort of indices don’t really reflect behaviour (after all, what does a “1” or a “5” as a corruption score mean?).  However, in another paper (“Cultures of Corruption: Evidence from Diplomatic Parking Tickets”), Ray Fisman and Edward Miguel demonstrated that U.N. diplomats basically only pay their tickets if their nation has a low corruption rating.  In other words, actions correspond to measured perceptions.

In fact, the third and fourth worst offenders for highest annual unpaid parking tickets per diplomat (at a whopping 124.3 and 119.1 respectively) were those bastions of propriety, Sub-Saharan Africa’s own Chad and Sudan.  Incidentally, these two countries tied for 156 (out of 163) in Transparency International’s 2006 ranking of perceived most corrupt countries.

I don’t think CIDA’s a great institution-and it’s horrific that 80% of its staff is in Ottawa-but there’s more to the problem than just inefficiency on their end.

Sunday, February 18, 2007

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