Harun Onder

New report: Growth, trade, and transformation

Uganda has made significant economic progress in the last three decades. Between 2000 and 2011, Uganda’s real GDP grew by an impressive average of 7.9 percent annually. Since 2011, however, growth has slowed down, exposing major economic fault lines in the long run. 

This Country Economic Memorandum analyzes: 

(i) Uganda’s structural transformation, 

(ii) the role of international trade, and 

(iii) future opportunities. 

The analysis shows that, for Uganda, where nearly two thirds of the workforce is occupied in agriculture, which produces less than a quarter of the GDP, a more productive employment of labor would inevitably become a central element of a future growth strategy. In Uganda, such a transition is hampered by a weak pull from manufacturing and services sectors, a weak push from agriculture (driven by credit constraints and frictions like weak land tenure), and substantial mobility costs. 

The report also takes a forward-looking approach to explore future opportunities and policies in Uganda, focusing specifically on five key areas: regional integration and trade, hydrocarbons, tourism, digital transformation, and climate change and the environment. 

Link to the PDF: Growth, trade, and transformation. 

New paper: Environmental policy under weak institutions

Will the increasing focus on climate and environment crowd out other development assistance? In this paper with Cem Karayalcin, we urge against that. Our analysis shows, in a seemingly paradoxical way, that in countries with weak institutions, focusing only on environment may not be good for the environment.

Consider levying a tax to reduce the overexploitation of a natural resource like water. When there are incomplete property rights over this natural resource, food imports are restricted, and a portion of the tax receipts can leak out of the economy due to corruption, the tax can increase the over-exploitation of the natural resource instead of reducing it, purely because of market mechanisms.

With restricted trade, the country still needs to produce a certain amount of food. As corruption reduces income, the relative demand for food increases as the poor spend a greater share of their income for food. Overall, the tax drives the agricultural production up, thereby increasing the resource exploitation.

The analysis shows that improving institutions, removing trade-barriers, and providing international aid in sectors that use the natural resource intensively can help alleviate this seemingly paradoxical result. Thus, environmental policies and other development activities should be considered as complementing each other. 

New report: Privatizing Growth

Tanzania has been an island of stability and growth in an ocean of instability. But, can it avoid falling into a development trap that has taken many countries down before?

This Country Economic Memorandum suggests that for a more sustainable and inclusive growth, the economy should transform from a public investment driven growth model to a private sector driven one.

This will need more transformative reforms and more attention to social spending to complement the public infrastructure push. 

Download the report here. 

Press release here.

Coping with climate shocks: Ecosystems vs. economic systems

📣 Who copes better with climate shocks, nature or people? In this Brookings blog, Cem Karayalcin and I analyze the similarities and differences between how ecosystems and economic systems respond to disasters.

➡ Similarities:

In both natural and economic systems, there are common tradeoffs between fragility and resilience. 

- In nature, the species who are more fragile against disasters (e.g., they are affected more) tend to be more resilient (e.g., their reproduction is much stronger).

- In economic systems, economies that trade with other economies (open economies) can be more fragile to shocks compared to the closed economies, but they are also more resilient.

➡ Differences:

Social organization/institutions can help overcome the fragility resilience tradeoff, but this "human ingenuity" has limitations.

- When governments enforce optimal environmental policies (mimicking complete property rights over natural assets), open economies can be both more resilient and less fragile than closed ones at the same time.

- There is a risk-return tradeoff in government intervention: Optimal environmental policies deliver better long-term outcomes, but in a world with persistent volatility, they can underperform for a long time.

Development Policy Financing for Tanzania

On December 20, the World Bank Group Board of Directors approved a $500 million financing for Tanzania. The program supports reforms under three pillars:

1. Improving the environment for private sector-driven recovery and growth: Removes longstanding constraints on private investment, including excessive bureaucracy, predatory taxation, and limited access to finance.

2. Strengthening the management of SOEs and fiscal risks and improving fiscal transparency: Strengthens the monitoring of state-owned enterprises (SOEs) and improves the management of fiscal arrears.

3. Boosting economic resilience: Introduces universal health insurance and climate change risk detection in financial and public investment sectors, and creates a comprehensive farmer registry.

Tens of colleagues from the Bank and the Tanzanian Government worked on this day and night, but the "warm-glow" one gets from helping others is priceless. 

The true cost of war

How can we measure the true cost of a war? In this new working paper, we are proposing a new approach to this problem.  Common indicators like casualties, infrastructure damages, and GDP effects chronically underestimate the cost of wars (e.g., trauma and sexual violence would not be counted unless they affect GDP).

The new approach compares migration patterns before & after a conflict to assess the welfare shock perceived by people. This has several advantages:

1. It is more comprehensive: It relies on people’s own preferences. No need to try to second-guess what matters to people, and try to measure & aggregate those, if data is available (often it is not). People already make those calculations when they decide on mobility.

2. It is more feasible: Many economic indicators are unavailable & unreliable during an active conflict. Our approach relies only on displacement data (not even in all destinations, just some), which is often available for humanitarian purposes (e.g., by UNHCR).

3. It is more flexible: We have applied the framework to the conflict in Donbas, Ukraine between 2014 and 2019; but the framework can be applied in other cases too.

See more here: https://bit.ly/3VVHAS3 

New paper: When do refugees return home?

An earlier version of this paper was prepared for "The Mobility of Displaced Syrians: An Economic and Social Analysis". This version further refines the analysis with additional material.  

This paper provides an empirical analysis of refugee returns to Syria. Since 2011, about 5.6 million Syrians – more than a quarter of the country’s pre-conflict population – have been registered as refugees. By mid-2018, only about 1.8 percent of them had returned to Syria voluntarily. This paper compiles a novel data set with administrative data for 2 million refugees, existing and new household surveys, a new conflict-events database, and nightlights data for Syria to analyze the correlates of these returns. A reduction in conflict intensity and an increase in luminosity in Syria increase the likelihood of spontaneous return. Moreover, the patterns of who returns and when differ between high and low conflict areas of Syria. Finally, we show there is a positive association between better conditions faced by refugees in exile and the likelihood of return to Syria. 

Economic characteristics of refugee arrivals and returns  

On October 14, 2021, a panel discussion on durable solutions to refugee crises was held by the RAND Corporation. I presented "10 Economic Characteristics of Refugee Arrivals and Returns", which drew from my previous analyses on the economic impact of refugees in Kenya and the Mashreq Region and the work on the return of Syrian refugees. 

Perhaps one of the most interesting points was the dissection of the "durable solution" concept. Stefanie Schwartz , a political scientist from USC, suggested that refugees do not always live happily ever after return (conflict dynamics may change as a response to returns). Shelly Culbertson and Louay Constant, researchers from RAND, highlighted the low incidence of return. 

I focused on the "solution" part of the concept. If "not returning" is the problem, "return" may seem like a solution. However, when we set the wellbeing of refugees, their hosts, and others in the country of origin as the policy target, "return" does not always present the best solution.  

Is private spending for space tourism wasteful?  

Billionaire Jeff Bezos' $5.5 billion space visit has received mixed public reception. Critics suggested that the money would be better spent for fighting global hunger and poverty. 

Would a transfer of cash to the poor be better than using money on space tourism? Surprisingly, the answer is not necessarily affirmative; but, there is a catch. More in this Brookings blog. 

See also the Flying Magazine column on this blog by Thom Patterson. 

What role can economics play in designing post-conflict economic recovery policies?

"We need to call an economist here" said no one ever in a war zone as the dust settles. 

But, in this blog, I argue that economists can help more in designing post-conflict recovery strategies. 

"The Fallout of War" launch event

Watch the session

On June 24, our report "The Fallout of War" was launched during the IV Brussels Conference on Syria. The session was hosted by Saroj Kumar Jha (World Bank Director for Mashreq), and comprised keynote speakers Ferid Belhaj (World Bank Vice President, MENA) and Olivér Várhelyi (EU Commissioner for Neighbourhood and Enlargement). 

Following my presentation of the report, a high-level panel moderated by Raouf Mazou (UNHCR Assistant High Commissioner) and comprising H.E. Zeina Akar (Deputy Prime Minister, Lebanon), H.E. Wissam Rabadi (Minister of Planning, Jordan), H.E. Bayan Sami Abdul Rahman (KRG Representative to the US) and Richard Albright (DAS, US Department of State) discussed impact of the Syrian conflict and the future of the Mashreq Region.  Mark Bryson Richardson (DFID Director for MENA) closed the session with his remarks.  

The event was attended by more than 300 guests from governments, international organizations, universities and civil society organizations from around the world. 

"Sharing oil rents and political violence" in European Journal of Political Economy

My paper with Tito Cordella on the distribution of natural resource revenues and conflict is forthcoming in Europan Journal of Political Economy. 

This paper shows that transferring large shares of oil wealth to own constituencies can prevent conflict, while transferring small shares can trigger it. Among the different transfer schemes, fiscal transfers (to subnational governments) yield the highest levels of consumption, but direct transfers (to people) are the most effective in preventing conflict. However, only a subset of such transfers is self-enforcing; those that avert conflict by reinforcing repressive regimes are of particular interest.

Previously, we also wrote a non-technical summary at Brookings.   

Presentation and panel discussion at the Middle East Institute

The Middle East Institute (MEI) hosted the public release of our new report, “The Mobility of Displaced Syrians: An Economic and Social Analysis.” In addition to my presentation (@ 20:30), World Bank Regional Director for the Mashreq Saroj Kumar Jha (@ 15:00)  and U.S. Institute of Peace Senior Advisor Mona Yacoubian (@1:04:20) gave remarks. The event was moderated by MEI Senior Vice President Amb. Gerald Feierstein (@ 8:00).

New report on the return of Syrian refugees

I was the lead author of a World Bank report (in collaboration with the UNHCR) on the key factors weighing on Syrian refugees contemplating a return home and how changing conditions in Syria might affect their decisions. "The Mobility of Displaced Syrians" analyzes the voluntary return of 103,090 Syrian refugees to determine the key factors that influenced their decisions. This group of refugees, who returned between 2015 and 2018, were compared with millions of others in Iraq, Jordan and Lebanon who chose not to return by using various statistical techniques including machine-learning. The results were compared with other refugee situations around the globe, ranging from Iraqi refugees in pre-war Syria, to the Balkans, and Somali refugees in Kenya.

This analytical approach allowed for a better understanding of the complex set factors that refugees must navigate as they consider a return home. Building on this understanding and recognizing that returns that have taken place so far may not be the same as future returns, the report also employs simulations to generate scenarios of security and service restoration in Syria and how that would influence spontaneous returns. Overall, the extensive analysis of data, review of international experience, and forward-looking simulations allowed for a comprehensive, evidence-based study of the return patterns of Syrian refugees. 

Are older people more nationalistic? 

I was invited to write an essay on nationalism by Zócalo Public Square editors. In this short essay, I reflected on why older voters tend to take a more nationalistic position than the youth, as shown in the Brexit Referendum and so many other recent elections. I argue that an increasing risk aversion and changing consumption patterns that comes with aging can shed some light on this behavior (in addition to some logical fallacy based explanation, e.g. nostalgia). 

In any case, better understanding the demographic drivers of voting behavior is important for political strategists. Demographic aging will increasingly shape the political dynamics in advanced economies in the coming decades.

Interview with the New York Times

A summary of my interview with the New York Times is out. The interview focused on the findings of our report, The Toll of War.