The Macroeconomic Effects of Cash Transfers: Evidence from Brazil (with Feler, Mendes, Miyamoto and Nguyen)

World Bank Policy Research Working Paper 10652 (Dec 2023) [link to working paper]. Media/blogs: Estadão, SF Fed Economic Letter. 

This paper provides new evidence on the macroeconomic impact of cash transfers in developing countries. Using a Bartik-style identification strategy, the paper documents that Brazil’s Bolsa Familia transfer program leads to a large and persistent increase in relative state-level GDP, formal employment, and informal employment. A state receiving 1% of GDP in extra transfers grows 2.2% faster in the first year, with R$100,000 of extra transfers generating five formal-equivalent jobs, half of which are informal. Consistent with a demand-side mechanism, the effects are concentrated in non-tradable sectors. However, an open-economy New Keynesian model only partially captures the high multipliers estimated.

Lives, Livelihoods, and Learning: A Global Perspective on the Well-Being Impacts of the COVID-19 Pandemic (with Decerf, Friedman, Mendes and Yonzan)

World Bank Policy Research Working Paper 10728 (March 2024) [link to working paper]. 

This study compares the magnitude of national level losses that the COVID-19 pandemic inflicted across three critical dimensions: loss of life, loss of income, and loss of learning. The well-being consequences of excess mortality are expressed in years of life lost, while those of income losses and school closures are expressed in additional years spent in poverty (as measured by national poverty lines), either currently or in the future. While 2020–21 witnessed a global drop in life expectancy and the largest one-year increase in global poverty in many decades, widespread school closures may cause almost twice as large an increase in future poverty. The estimates of well-being loss for the average global citizen include a loss of almost three weeks of life (19 days), an additional two and half weeks spent in poverty in 2020 and 2021 (17 days), and the possibility of an additional month of life in poverty in the future due to school closures (31 days). Well-being losses are not equitably distributed across countries. The typical high-income country suffered more total years of life lost than additional years in poverty, while the opposite holds for the typical low- or middle-income country. Aggregating total losses requires the valuation of a year of life lost vis-à-vis an additional year spent in poverty. If a year of life lost is valued at five or fewer additional years spent in poverty, low-income countries suffered greater total well-being loss than high-income countries. For a wide range of valuations, the greatest well-being losses fell on upper-middle-income countries and countries in the Latin America region. This set of countries suffered the largest mortality costs as well as large losses in learning and sharp increases in poverty.

A Precise Zero: Local Fiscal Multipliers from Kenya’s Devolution Natural Experiment  (with Mustapha Wasseja Mohammed, work in progress, 2025)

This paper estimates the subnational fiscal multiplier in Kenya using a natural experiment stemming from the 2013 fiscal decentralization. The reform, mandated by the 2010 Constitution, reallocated 15% of national revenues—equivalent to 4% of GDP—to 47 newly formed county governments. Because the allocation was determined ex-ante by a fixed formula, the variation in expenditure is plausibly exogenous to contemporaneous county-level economic shocks.  Despite an increase in spending in some of the poorest regions of 15-35% of county GDP, it is difficult to detect any effects of the devolved expenditure on country level economic growth.  Our preferred panel IV estimate is a precisely estimated regional multiplier close to zero.

Evaluating Macroeconomic Effects of Cash Transfers through the lens of the New Keynesian and Financial Stress Models (with Mendes, Miyamoto and Nguyen, work in progress 2025)

The Contribution of Human Capital to Current and Future Growth : An Extension of the World Bank’s Long-Term Growth Model (LTGM-HC) (with Mendes)

World Bank Policy Research Working Paper 11276 (December 2025) [link to working paper][Let's Talk Development Blog] [Spreadsheet tool: www.worldbank.org/LTGM]

This paper presents the Long-Term Growth Model–Human Capital Extension (LTGM-HC), a spreadsheet-based toolkit that projects the human capital of the workforce from 2025 to 2100 for 153 countries. The LTGM-HC simulates pre-tertiary years of schooling, education quality, and health across age cohorts and how they affect current and future workforce productivity. The paper also produces three sets of general results. First, it provides new estimates of the current rate of human capital growth, which differ substantially from those in the Penn World Tables. Global average human capital growth is almost 1 percent and is surprisingly similar across income groups, as greater historical gains in years of schooling in poorer countries are offset by lower initial school quality. Second, it provides new estimates of the pace of future human capital growth. Without future reforms, average human capital growth will slow by around 0.15-0.2 percentage points per decade, hitting zero by 2080 when today’s children begin to retire. In contrast, a scenario with a typical pace of reform almost halves the rate of decline. Finally, it provides new estimates of the contribution of human capital to current and future economic growth. In a typical reform scenario, human capital growth is projected to raise annual GDP per capita growth by around half a percentage point over the next 75 years, leaving GDP per capita 45 percent higher by 2100. However, about two-thirds of these gains reflect reforms that have already been enacted. An extension to include tertiary education raises human capital growth, and its contribution to GDP growth, by around 0.1-0.2 percentage points.

Long-Term Growth Prospects in Peru: Leveraging the Global Green Transition and the Reforms Needed to Become a High-Income Country (with Barco, Celiku, Chávez, Mendes and Resk) 

World Bank Policy Research Working Paper 10900  (September  2024) [link to working paper]

This paper uses the World Bank Long-Term Growth Model and extensions to study Peru’s long-term growth prospects and its potential to attain high-income economy status. Under a business-as-usual baseline, Peru’s potential GDP growth declines slowly from 2.1 to 1.7 percent over the next two decades, due mostly to demographic factors. In this baseline, it takes more than half a century to reach high income status. To accelerate growth, the paper considers moderate and ambitious reform scenarios for the non-resource sector through faster total factor productivity (TFP) growth, human capital growth, and higher investment rates. The ambitious reform path accelerates growth to an average of 4.3 percent in the simulation period (2024–50), allowing Peru to reach high-income status by 2045. The paper also considers a Global Green Transition scenario, where Peru takes advantage of higher global demand for copper from clean technologies. In that scenario, higher copper prices, greater exploration, improved mining technology, and reinvested copper windfalls increase baseline growth to 3.1 percent by 2035. If Peru were able to harness the global green transition and implement ambitious reforms in the non-resource sector, growth could accelerate to an average of 5 percent, and the country could reach high-income status by 2042.

How Large Are the Economic Dividends from Closing Gender Employment Gaps in the Middle East and North Africa? (with Fiuratti and Torres)

World Bank Policy Research Working Paper 10706  (February 2024) [link to working paper]

This paper quantifies the gains in gross domestic product per capita from closing gender employment gaps in the Middle East and North Africa, using three neoclassical growth models. The paper starts with baseline impacts from the Gender Employment Gap Index, which suggests that in the long run, gross domestic product per capita would be around 50 percent higher in the typical economy in the region if gender employment gaps were closed (mean 54 percent, median 49 percent). However, the gains are heterogeneous, ranging from less than 10 percent in Qatar to more than 80 percent in the Republic of Yemen. The paper then explores short-term gains, when capital is fixed (or adjusts slowly), and gains in the medium-term, with sluggish implementation of reforms using the Long Term Growth Model, which roughly halves the gains (and lowers the gains by more than half in resource-rich countries). Finally, the paper incorporates the effects of changes in the skill distribution in a model incorporating capital-skill complementarities in production. Because gender employment gaps in the Middle East and North Africa tend to be larger among the unskilled, closing these gaps reduces average skill levels, moderating long-term gains by 5-10 percentage points. However, if women in the Middle East and North Africa continue the current trend toward greater educational attainment, the gains will be greater than in the baseline. All three models—the Gender Employment Gap Index, the Long Term Growth Model, and capital-skill complementarities—point to large increases in gross domestic product per capita from closing gender employment gaps.

Assessing the Effects of Natural Resources on Long-Term Growth : An Extension of the World Bank Long Term Growth Model (with Loayza, Mendes and Mendez Ramos)

World Bank Policy Research Working Paper 9965  (March 2022) [link to working paper][Link to spreadsheets]

This paper extends the World Bank's Long-Term Growth Model (LTGM) with the addition of a natural resource sector to analyze how long-run growth evolves in resource-rich countries and the growth impacts of price shocks and resource discoveries. In the LTGM-Natural Resource Extension (LTGM-NR), commodity price shocks affect long-term economic growth through physical investment rates. As a large share of resource income typically accrues to the government, the size of the boost to investment in a price boom depends on the government’s fiscal rule. Fiscal rules that prioritize public investment, like a Hartwick Rule, generally lead to the largest increases in long-term growth. However, structural surplus rules, which save commodity revenues, can also boost growth if they free up savings for private investment. The response of growth to discoveries of natural resources is similar to the response to price shocks, although discoveries also produce a direct effect on real GDP, in addition to an indirect effect through investment. The LTGM¬-NR also captures the effect of other (non-resource) growth fundamentals in resource-rich economies, and it is better suited to general growth analysis in these countries than the standard LTGM. However, the LTGM-NR is a supply-side model, and so does not capture the short-run effects of price and discovery shocks that operate through aggregate demand.

A Gender Employment Gap Index (GEGI): A Simple Measure of the Economic Gains from Closing Gender Employment Gaps, with an Application to the Pacific Islands  World Bank Policy Research Working Paper 9942  (February 2022) [link to working paper][link to dataset (GEGIs for each country)][blog]

Despite a policy consensus that closing gender employment gaps will boost economic growth, relatively little is known about the size of these gains in many developing countries. This paper develops a new Gender Employment Gap Index (GEGI), which is equal to the size of long-run GDP per capita gains from closing gender employment gaps. The GEGI is simple and transparent and can be easily constructed using closed-form expressions for almost all countries using macroeconomic employment rate data by gender. The basic variant of the GEGI is the gap between male and female employment as a share of total employment. The full GEGI is similar, but instead of using an aggregate employment gap, the full GEGI is the weighted average of a “better employment gap” and “other employment gap.” The basic and full GEGIs are similar (correlation of 0.97), and both average 19 percent across countries. This means that GDP per capita in the long run would be almost 20 percent higher if female employment were exogenously increased to be the same as men’s (other things being equal). The paper also provides an application for the Pacific Islands, for which a simple measure like the GEGI is particularly important given the lack of alternative estimates. 

The Utilization-adjusted Human Capital Index (UHCI) World Bank Policy Research Working Paper 9375 (September 2020) [link to working paper][link to dataset]

        The World Bank Human Capital Index (HCI) is based on the productivity gains of future workers from human capital accumulation. But in many developing countries, a sizable fraction of people are not employed, or are in jobs in which they cannot fully use their skills and cognitive abilities to increase their productivity. The Utilization-adjusted Human Capital Indices (UHCIs) adjust the HCI for labor-market underutilization of human capital, based on fraction of the working age population that are employed, or are in the types of jobs where they might be better able to use their skills and abilities to increase their productivity (“better employment”). The UHCIs generalize the growth-based interpretation of the HCI: the inverse of a country's UHCI score represents long-run GDP per capita with complete human capital and complete utilization, relative to that under the status quo. The UHCIs are designed to complement the HCI, and not to replace it: they have different purposes, and the challenges of measuring utilization mean that the UHCIs should be interpreted with caution for policy analysis. Both utilization measures are available for more than 160 countries, and are roughly U-shaped in per capita income, suggesting human capital is particularly underutilized in middle-income countries. Human capital is also underutilized for women: while the HCI is roughly equal across boys and girls, female UHCIs are typically lower than those for males, driven by lower employment rates. 

The Human Capital Index 2020 Update : Human Capital in the Time of COVID-19 (with  R. Gatti, P. Corral, N. Dehnen, R. Dsouza, J.  Mejalenko) [Report link] (Sept 2020)

Malaysia's Economic Growth and Transition to High Income: An Application of the World Bank Long Term Growth Model (LTGM) (with S. Devadas, J. Guzman, Y. Kim, N Loayza) World Bank Policy Research Working Paper 9278 (June 2020) [link to working paper]

Macroeconomic Policy in the Time of COVID-19 : A Primer for Developing Countries (with Norman Loayza)  Research and Policy Brief, 26 March 2020, [link]

Assessing the Effect of Public Capital on Growth: An Extension of the World Bank Long-Term Growth Model (with Sharmila Devadas) 

World Bank Policy Research Working Paper 8604 (October 2018) [link to working paper] [online appendix]

Journal of Infrastructure, Policy and Development (2019) 3(1) (reprint) [link]

Long-term Growth Model (LTGM) Project (with Norman Loayza and team). 

    The LTGM is an Excel-based tool to analyze future long-term growth (and poverty) scenarios, building on the celebrated Solow-Swan Growth Model. Includes a number of extensions.

    Spreadsheets, slides, papers, country applications and extensions available at: http://www.worldbank.org/LTGM

Consumption Smoothing and Shock Persistence: Optimal Simple Fiscal Rules for Commodity Exporters (with Arthur Mendes)

World Bank Policy Research Working Paper 8035 (April 2017) [link to working paper]

Fiscal Consolidations and Growth: Does Speed Matter? (joint with Esther Perez Ruiz), [link]

IMF Working Paper 13/230 (November 2013); Media: Businessweek 

Private Business Investment in Australia (joint with Lynne Cockerell) 

Reserve Bank of Australia Discussion Paper 2007-09

A long history of a short block: four centuries of development surprises on a single stretch of a New York City street (joint with William Easterly and Laura Freschi) 

Latest version: June 2016 [link]; Interactive website [link]; Media: Wall St Journal, Financial Times, Marginal Revolution, Wired

How much long-run economic growth happens at the country level? (with Diego Anzoategui and William Easterly) 

Latest version: November 2018 [link]

The fading dividend of past human capital reforms

Let's Talk Development Blog, 17 December 2025 [link] (with Arthur Mendes)

One rule doesn’t fit all: Rethinking fiscal policy for commodity-exporting developing economies

Let's Talk Development Blog, 24 April 2025 [link] (with Arthur Mendes)

Policy Research Talk #2  - The Long Term Growth Model: Fundamentals, Extensions, and Applications

Presentation Slides  |  Video  | Event Website (March 21, 2023, with Norman Loayza)

Policy Research Talk #1  - Long-Term Growth in Developing Countries

Presentation Slides  |  Video  | Event Website (December 14, 2021)

World Bank Feature Story on the Long Term Growth Model (LTGM) [link] (February 15, 2022)

Long Term Growth Model (LTGM) Training

World Bank MTI Forum, Washington DC, November 2019 [link to slides]

Spreadsheets on main LTGM website: www.worldbank.org/LTGM

How much would GDP per capita increase if gender employment gaps were closed in developing countries?

Let's Talk Development Blog, 4 March 2022 [link]

Historical lessons from China’s monetary policy during transition (1987–2006): Central bank reform and nominal anchor 

All About Finance Blog, 4 January 2021 [link]

Historical lessons from China’s monetary policy during transition (1987–2006): Monetary policy transmission and the choice of instruments 

All About Finance Blog, 11 January 2021 [link]

The Effect of Fiscal Policy on Growth in the Short and Long Run

XXVIII Cycle of Economic Lectures, Banco de Guatemala, June 2019  [link to slides]

Notes on Approaches to  Growth Accounting , 28 January 2017 [link]

LTGM Spreadsheet Archive (for training purposes): LTGM v5.61 (April2025), LTGM-PC v5.61 (April 2025), LTGM-HC v0.6 beta (April 2025), LTGM v5.71 (Oct 2025), LTGM-PC v5.72 (Oct 2025)