The death of development theory: From Friedrich von Hayek to the Washington consensus

Abstract

Development strategies followed by many countries in the 20th century bestowed a relevant role to the State. During the 1970s, it all reversed, and free markets became paramount to efficiency. F. von Hayek and the Mount Pelerin Society led the way to eliminate the State as a significant economic player, while P.T. Bauer extended such ideas to development economics, which would eventually give way to the Washington Consensus. Beyond actual results of such policies, it is surprising to see the appeal of Bauer’s theoretical approach, considering that it is constructed disregarding both empirical evidence, as well as the abundant discussion on development that was taking place contemporarily. This article explores the theoretical process of such reversal in development economics theory.     

Local Labor Supply Responses to Immigration

How natives adjust is central to an understanding of the impact of immigration in destination countries. Using detailed labor force data for Malaysia for 1990–2010, we provide estimates of native responses to immigration on multiple extensive margins and rare evidence for a developing country. Instrumental variable estimates show that increased immigration to a state causes substantial internal inward migration, consistent with the fact that immigration increases the demand for native workers. Relocating Malaysian workers are accompanied by their spouses (three‐quarters of whom are housewives) and children who attend school. We find that these effects are concentrated among middle‐ and lower‐skilled Malaysians.     

Consuming together (versus separately) makes the heart grow fonder

Marketing Letters - Across three studies, we investigate how consumers in romantic relationships make decisions when choosing an item to share with their partner. We show that consumers will forgo...     

Is Irrigation Rehabilitation Good for Poor Farmers? An Impact Evaluation of a Non‐Experimental Irrigation Project in Peru

This paper analyses the effect of a set of irrigation rehabilitation projects conducted over the last 10 years in Peru. The projects were conducted without the aim or the tools for a full‐fledged impact evaluation. Nevertheless, this paper attempts an evaluation through the use of alternative data sources such as household surveys and geographic information, a strategy of identification of beneficiaries and control households based on spatial proximity to the projects’ sites, and an econometric approach consisting of a double‐differencing technique. The empirical analysis is guided and interpreted with the help of a theoretical model that considers the effects of an irrigation project on the distribution of production, employment and income for different types of landowners. The paper concludes that the irrigation projects implemented in Peru had a positive impact on intended beneficiary households, but not in the way it could have been simplistically expected. The project did benefit the poor but not by increasing production in their own small plots but by providing them with better employment opportunities in larger farms.     

Minimum Wage: Does it Improve Welfare in Thailand?

We study the causal impact of the minimum wage on labor market outcomes, household consumption, inequality and poverty in Thailand by relying on policy variation in minimum wages over time across provinces. We find that minimum‐wage increases have a large and significant impact on the likelihood of working in the uncovered sector among workers with elementary education. However, the impact is very small and insignificant among other labor market groups. In contrast, the minimum wage has large positive effects on the formal sector wages of low‐earning workers, such as the young, elderly and low educated. Increases in the minimum wage are associated with reductions in household poverty and consumption inequality at the bottom half of the distribution.     

Afro‐descendants in Peru: Do beauty and race matter in the labor market?

This is a first study about labor discrimination against Afro‐descendants in Peru. We randomly assigned Afro‐Peruvian and white surnames and photographs (subjectively beautiful, homely looking, or not photos) to 3,828 fictitious résumés, sent for unskilled, technical, and professional occupations. We find an unprecedented, sizeable beauty premium in unskilled occupations (232.5 percent), no effect of looks in technical occupations, and a beauty penalty in professional occupations (–71.3 percent). Overall, whites receive 19.37 percent more callbacks than similarly qualified Afro‐Peruvians; this racial discrimination affects only Afro‐Peruvian females, and particularly those employed in technical occupations. These results remain unaltered when we restrict the sample to those markedly “Afro” surnames. Our findings unveil different dynamics of discrimination across job categories, which tend to be overlooked by the existing literature.