Blog

12 February 2018

Our Research Director Professor Sam Hickey is this week featured on The UN Global Dispatches Podcast. He talks about ground breaking ESID research on how governments might avoid the resource curse – the negative consequences that befall a country when it discovers a valuable resource, like oil.

Sam discusses ESID’s research into how governments in Africa are approaching their oil sectors. This includes, the fascinating study into the surprising differences in how recently discovered oil has been governed in competitive clientelist Ghana and more authoritarian Uganda.

28 January 2019

Antonio Savoia, Roberto Ricciuti and Kunal Sen

This blog was first published on OECD Development Matters

The capability to raise revenues from taxes – often called fiscal capacity – is a crucial aspect for the functioning of every state, particularly in developing countries. Two reasons account for this. First, greater fiscal capacity is fundamentally important for state formation, as it is usually associated with the creation of a civilian bureaucracy that can itself provide an enabling environment for the consolidation of statehood. Second, greater fiscal capacity implies greater access to resources needed to provide public goods. Developing countries are only able to raise a small share of taxes over GDP compared to advanced economies. They need higher revenues to invest in a number of economic and social areas that are crucial for their growth, such as healthcare, education and infrastructure. This is also relevant to pursue the Sustainable Development Goals (SDGs) by 2030, an ambitious enterprise requiring far greater resources. Indeed, SDG 17 explicitly refers to the mobilisation of government revenues (Target 17.1).

Our recent research¹ finds that learning to tax depends on what kind of political institutions are in place. Political systems that place stronger constraints on the executive power are more likely to lead to taxation systems that have a higher degree of transparency towards their citizens. This is because in such systems non-state actors can control and limit the elites’ access to resources. Thus, they are able to demand greater accountability on the part of the state with respect to the taxes they pay. In turn, processes of tax payment and collection characterised by greater transparency and accountability of tax authorities make taxation more consensual between states and citizens. This builds tax morale and has a significant effect on the amount of revenues raised.

Based on a sample of 47 developing economies, our analysis looks at whether greater constraints on the executive have a positive effect on the transparency of the taxation system. We use a popular measure of the effectiveness of checks and balances on the executive power by Polity IV as well as a set of indicators created by the Public Expenditure and Financial Accountability project to capture the degree of transparency and accountability of tax authorities. For example, we selected a variable evaluating taxpayers’ access to information on tax liabilities and administrative procedures (Figure 1) and one assessing the quality and functioning of tax appeals mechanisms (Figure 2). Using various estimation methods to check the robustness of our results, we first conclude that the existence of effective constraints on the executive makes tax systems more accountable and transparent.

Figure 1 – Transparency of taxpayer obligations and liabilities
and constraints on the executive

Source: Ricciuti R., Savoia A. and Sen K. (2019), “How do political institutions affect fiscal capacity? Explaining taxation in developing economies”, Journal of Institutional Economics, forthcoming.

Figure 2 – Quality of tax appeals mechanisms
and constraints on the executive.

Source: Ricciuti R., Savoia A. and Sen K. (2019), “How do political institutions affect fiscal capacity? Explaining taxation in developing economies”, Journal of Institutional Economics, forthcoming.

Does this have an effect on tax revenues? Our second key finding is that a typical increase in the constraints on the executive index results in an average growth in total tax revenues or income tax revenues (measured as a share of GDP) of 2.4 percentage points over just under a decade. Bearing in mind that developing economies typically raise 10-20% of their GDP in taxation, this is a significant impact.

So, an important way for developing countries to learn how to tax is to strengthen the political institutions providing effective checks and balances on the executive’s discretionary power. Designing and implementing reforms in this direction presents challenges, such as opposition from elites who stand to lose from political change. Benefits may only materialise in the medium- or long-term. But it is still worth trying. After all, mobilising revenues is itself a development target in the SDGs. It is also crucial for providing the much-needed resources to make progress on all the other targets, thereby generating synergies across different development goals.

Read the research this blog is based on here

17/1/19

Brian Levy

This post was first published on Brian’s blog Working with the Grain

When does a call to ‘work with the grain’  violate foundational ethical commitments? Governance reversals globally have given new urgency to this question; it has recently been posed both in Oxfam’s blog and in the London School of Economics Public Authority  blog series. The new year seems like a good time to share my views, in the form of five guideposts.

When I wrote Working with the Grain (WWG) in the early  2010s,  my intent was to provide a road map for pragmatism. At the time, it was plausible to think that, haltingly and unevenly, the arc of the moral universe was bending towards justice. But five years later there’s no avoiding the rise of polarisation, ethno-nationalism and authoritarianism.  In such a time, a call to engage pragmatically with power might seem hollow – or worse. What, then, is to be done?

• Guidepost #1: Distinguish between critical junctures and the (generally long) intervals between them.

This guidepost follows directly from the logic of  ‘political settlements’. As per Mushtaq Khan, a political settlement prevails where ‘the distribution of benefits supported  by its institutions is consistent with the distribution of power in society – and the economic and political outcome of these institutions is sustainable over time’.  Approaches to engagement at critical junctures are thus qualitatively different from those in a time of stability.  In writing WWG, my  principal focus was on the latter. Hence:

• Guidepost #2: During periods of stability, anchor reform efforts within an understanding of the political and institutional incentives and constraints which prevail in a particular context.

WWG aimed to identify a variety of distinct contexts, each comprising a distinctive platform for development, with distinctive incentives for the participants, distinctive constraints and risks, and distinctive frontier challenges. Directing attention to these incentives and constraints was intended to provide a platform for identifying specific ‘good fit’ policy actions which are both worthwhile and feasible, given country-specific institutional realities.

Working along these lines  is very different from ‘going with the flow’ –  it is a call to work creatively within  the broader prevailing policy, institutional and political realities. Thus:

• Guidepost #3: A ‘with the grain’ approach need not be timidly incremental – its aim is to encourage  reflection as to the merits of a spectrum of context-specific entry points for achieving specific policy, sectoral and institutional goals.

As illustrated by the figure below (taken from WWG), in working to address some specific reform challenge there is a  spectrum of options. At one end are narrowly incremental options, aligned with the existing space for reform; at the other end is the option of engaging with stakeholders to expand the space for reform.  At every level of decision-making, reformers (in government, civil society or the donor community) must clarify how to position their engagement along this spectrum. While during periods of political stability, room for manoeuvre generally is likely to be limited vis-à-vis reforms of a country’s core governance arrangements, at more micro-levels the scope to be proactive in working to ease constraints is potentially larger along both trajectories.

THE SPECTRUM OF REFORM SPACE

                                              <====================================================================================>

Adapt design to align with existing reform space                                                   Expand reform space

But how to proceed when the broader political and institutional environment is itself in question?  In a 2017 review of Duncan Green’s important book, How Change Happens, I distinguished between the ‘how’ and the ‘what’ of reform. The ‘how’ task was, as Duncan put it, to learn to ‘dance with the system’. But preoccupation with the ‘how’, with pragmatic responses to very specific problems, ceded to ideologues of both the right and the left the terrain of broader discourse as to public purpose. In consequence:

“we lost sight of the dynamics of power – specifically of the power of political parties to mobilize on the basis of ideas and incentives which we easily dismissed as reactionary. In so doing, we ceded the terrain of contestation over the largest political prize of all – control over state institutions – to actors and ideas which we presumed had been consigned to the dustbin of history. …. And then, one bleak morning after another, we awoke to discover that the terrain had shifted radically, that control over state institutions was shifting, and that our hard-won incremental gains risked being washed away by tidal waves of reaction….. Today’s times require heightened attention to the vision towards which change efforts are directed; we need a new balance between the ‘what’ and the ‘how’”. Hence:

• Guidepost #4: Context  –  time as well as place  – shapes whether or not a ‘with the grain’ approach is a useful way forward.

In some times and places, reform might focus most effectively on modest incremental changes; in others, there might be scope for expanding the range of stakeholders engaged in specific reform efforts; in yet others, fundamental questions as to the way forward may be on the agenda. This is what (as of 2019)  I mean by ‘working with the grain’. No one size fits all.

This brings me to the ‘what’ of reform.  At critical junctures, when foundational political and institutional challenges are in play, there are obvious limitations to with-the-grain incrementalism.  But even at these junctures,  the spirit of WWG  has a distinctive implication (one to which I remain strongly committed) – it redirects  attention away from polarised debates about fanciful ends towards pragmatic exploration of what Albert Hirschman termed ‘a passion for the possible’. This is especially relevant for efforts to transform governance.

Over the long run, good governance may indeed be a destination to which, as countries develop, their governance systems converge. But the ability to describe the characteristics of effective states – of well-functioning public sectors, of a robust rule-of-law –  does not  conjure them into existence out of thin air. Best practice approaches assume that all policies and institutions are potentially moveable, and can be aligned to fit some pre-specified blueprint. But they cannot. The empirical evidence (which I laid out here and here) signals unequivocally the failure over the past quarter-century of efforts to leapfrog by re-engineering.  Indeed, as I explored in depth in a review of Bill Easterly’s Tyranny of Experts, scholars underscore that historically the process of strengthening the rule of law played out over many centuries; it was long, messy and circuitous, fraught with violence, and variable in its outcome. Hence:

• Guidepost #5: Avoid fanciful counterfactuals of what is possible – the evolution of ‘foundational’ institutions from personalised to impersonal is a slow, cumulative process. 

It is easy (and seductive) to preach Manichean visions of perfection and evil; if one has no real interest in governing effectively then there is no reason to exercise restraint. But, as history teaches us, the consequences can be the opposite of the initial good intentions. (This last caution applies with particular force to outsiders to a particular country context seeking to support improvements in governance, who do not have to live with the consequences of their efforts.  They could usefully work harder to embrace the precautionary principle of ‘first, do no harm’.)

In bringing the pragmatic spirit of WWG to the challenge of the ‘what’, the task is to communicate two superficially contradictory ideas at the same time: that embracing a vision of inclusion and stewardship in a thriving society offers a pathway to a fulfilling life – and that the quest to realise that vision will be challenging, fraught with obstacles. As I put it in an earlier piece:

“Vision, process and strategy can become a mutually reinforcing pathway of democratic development. An inclusive vision brings the promise of dignity to center stage; an inclusive process is one that systematically affirms that dignity; and an inclusive strategy offers ample opportunity for the practice of ‘active citizenship’ for engagement among equals. In its essence, what democracy offers – and authoritarian alternatives do not – is an invitation to citizens to work to shape their own lives and to participate peacefully in the shaping of their societies, according to their distinctive visions of freedom and justice. This journey is a challenging one – with much democratic ‘messiness’, and corresponding disappointment along the way. But no matter how challenging the journey, once the invitation to engage has been embraced, the personal dignity it offers cannot be taken away. This invitation, not empty guarantees of success,  is at the core of the democratic vision – its inspiration, its source of sustainability.”

Rasmus Hundsbæk Pedersen, Lars Buur, Thabit Jacob and Padil Salimo

18 December 2018

In theory, development aid is about helping the world’s poor. Therefore, there are rules on how to distribute aid if it is to be counted as official development assistance (ODA). Much aid is given through ‘partnerships’ between development donors and governments in recipient countries. This has been a trend for a couple of decades and, in particular, since the Paris Declaration on Aid Effectiveness in 2005. Partnerships should help to improve developing countries’ ownership over their domestic development processes. This, in turn, should improve the effectiveness of aid.

However, there is also a political side to aid that is still little understood. Recipient countries’ governments are not merely recipients of technocratic advice. They are also political actors, who operate in rapidly changing domestic political contexts. Therefore, the social programmes that they prefer to implement may target the poor, but they often also help governments maintain power. The trend is more pronounced in countries which are undergoing democratisation. This is a main finding in recent research we’ve conducted for ESID into social protection programmes in Tanzania and Mozambique. Continue Reading →

27 November 2018

Pritish Behuria is a Hallsworth Research Fellow at The Global Development Institute (GDI), The University of Manchester, and researcher for ESID. We caught up with him to before a trip to Rwanda to find out more about his life and work.

What first made you want to work in development research?

One of the reasons I was drawn to development studies was the focus on conducting fieldwork in developing countries. The interdisciplinary nature of international development/development studies means that researchers have more freedom to depart from the restrictive paradigms of disciplines, where dominant theories are largely based on research in Western societies.

The colonial heritage of development studies often turns people off and makes them revert to the comfort of their disciplines. But many early career scholars from developing countries (including me)  found an intellectual home in the field precisely because of the opportunity to focus our research in countries outside the West.

Tell us more about being a Hallsworth Research Fellow.

The Hallsworth Research Fellowship is a three-year postdoctoral fellowship at The University of Manchester, loosely focused on political economy. The Hallsworth is designed to provide postdoctoral researchers with the opportunity to develop an independent research project. It is among the very few scholarships, available in the United Kingdom, that are heavily research-focused and provide a large amount of freedom.

I have used my Hallsworth to begin a comparative study of the politics of the Rwandan and Ethiopian development experiences over the past two decades. This builds on my research in Rwanda over the last decade. Luckily, the Effective States and Inclusive Development Research centre has also provided additional research funding for my Hallsworth project and an additional research project on the History and Politics of Diversified Business Groups in Kenya, Tanzania and Nigeria.

What do you think are the most important findings from your work on effective states?

During ESID’s first phase, I was part of the economic growth team that worked on the Deals and Development book, edited by Kunal Sen, Lant Pritchett and Eric Werker. I worked with Tom Goodfellow on the Rwandan case. Our chapter departed from existing narratives on Rwanda’s growth story to show that, though the Rwandan Patriotic Front may have led the country through a period of ‘miracle’ growth, there has been limited structural transformation. We had two main conclusions. The first is that the high degree of openness in the deals space in Rwanda has resulted in poorly coordinated economic development without sufficient enforcement capability of the state to discipline firms (against many of the narratives of the Rwandan government’s effectiveness). The second is that the growth remains highly dependent on and vulnerable to open competition, which has resulted in unpredictable and inconsistent government behaviour in some cases.

Which research are you most proud of?

I’m quite proud of the scale of fieldwork I’ve done in Rwanda since 2011. That’s over 570 interviews across different stints of research over the last eight years. Of course, there is still a lot to do!

I think the time I’ve spent in Rwanda, interviewing my respondents, has really taught me a lot. It was pretty incredible to have the chance to interview so many people who were so committed to delivering development, despite the many challenges they faced in achieving those goals.

What’s the best thing about working at GDI?

It has been really great to work at GDI. It is an exciting and vibrant environment with a lot going on. What’s really special about GDI is the kind of mentorship that the Institute provides to help you improve your work and develop an independent research career. Senior scholars are very serious about their commitment to providing early career scholars with opportunities. That is a rare and pretty special thing.

What do you do when you’re not working?

I’m still pretty new to Manchester, so I’m still discovering new things here. But if I’m not working, you’ll usually find me exploring the Northern Quarter. A new, cool Ramen place just opened. But they haven’t paid me to advertise … (yet).

Read Pritish’s most recent research for ESID on coffee production and global value chains in Rwanda here.

Follow Pritish on twitter @pritishbehuria