2004 Public Disclosure Authorized ABCDE Annual World Bank Conference on Development Economics Public Disclosure Authorized Accelerating Development Public Disclosure Authorized Edited by François Bourguignon and Public Disclosure Authorized Boris Pleskovic Themes and Participants for the 16TH ANNUAL WORLD BANK CONFERENCE ON DEVELOPMENT ECONOMICS (ABCDE) Washington, D.C. “LESSONS OF EXPERIENCE” MAY 3–4, 2004 Lessons of Experience Behavioral Economics Infrastructure and Development Trade and Development James D. Wolfensohn • François Bourguignon • Richard N. Cooper • Gustav Ranis • Abhijit Banerjee • Pedro Malan • Vernon L. Smith • Sendhil Mullainathan • Colin Camerer • Karla Hoff • Rémy Prud’homme • Eduado Engel • Nemat T. Shafik • Riccardo Faini • Gerald Helleiner • Jeffrey G. Williamson Annual World Bank Conference on Development Economics 2004 Accelerating Development Edited by François Bourguignon and Boris Pleskovic A copublication of the World Bank and Oxford University Press © 2004 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail [email protected] All rights reserved. 1 2 3 4 07 06 05 04 A copublication of the World Bank and Oxford University Press. Oxford University Press 165 Madison Avenue New York, NY 10016 The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, fax 202-522-2422, e-mail [email protected]. Edited by François Bourguignon and Boris Pleskovic. Annual World Bank Conference on Development Economics is indexed in Human Resources Abstracts, Index of Economic Articles, Index of Social Science and Humanities Proceedings, Index to International Statistics, Public Affairs Information Service, Sage Public Administration Abstracts, Stan- dard Periodical Directory, and Ulrich’s International Periodicals Directory and online by ABI/INFORM and DIALOG. ISBN 0-8213-5800-6 ISSN 1020-4407 Contents ABOUT THIS BOOK V INTRODUCTION 1 François Bourguignon and Boris Pleskovic OPENING ADDRESS 11 S. M. Krishna KEYNOTE ADDRESSES Building Human Capital for Economic Development 13 Azim Hasham Premji Opportunities for India in a Changing World 17 Nicholas Stern Infrastructure Development in India: Emerging Challenges 35 Rakesh Mohan Fostering Entrepreneurship, Innovation, and Growth Entrepreneurship, Innovation, and Growth 73 T. N. Srinivasan Toward a Microeconomics of Growth 105 Robin Burgess and Anthony J. Venables COMMENTS Gur Ofer 140 Sidney Winter 149 Challenges of Development in Lagging Regions World Poverty: Causes and Pathways 159 Partha Dasgupta IV | CONTENTS Development Strategy: Transition and Challenges of Development in Lagging Regions 197 Justin Yifu Lin and Mingxing Liu COMMENTS Govinda Rao 224 Karen R. Polenske 230 Participation, Inclusion, and Results Community-Based Development in the Context of Within-Group Heterogeneity 241 Jean-Philippe Platteau Inclusiveness, Accountability, and Effectiveness of Development Assistance in Sub-Saharan Africa 271 Benno J. Ndulu COMMENTS Rohini Nayyar 301 Vijayendra Rao 305 Scaling Up and Evaluation Using Randomized Experiments and Structural Models for Scaling Up: Evidence from the PROGESA Evaluation 315 Orazio P. Attanasio, Costas Meghir, and Miguel Székely Scaling Up and Evaluation 341 Esther Duflo COMMENTS François Bourguignon 370 T. Paul Schultz 376 About This Book The Annual World Bank Conference on Development Economics is a forum for dis- cussion and debate of important policy issues facing developing countries. The con- ferences emphasize the contribution that empirical and basic economic research can make to understanding development processes and to formulating sound develop- ment policies. Conference papers are written by researchers in and outside the World Bank. The conference series was started in 1989. Conference papers are reviewed by the editors and are also subject to internal and external peer review. Some papers were revised after the conference, sometimes to reflect the comments by discussants or from the floor. Most discussants’ comments were not revised. As a result, discus- sants’ comments may refer to elements of the paper that no longer exist in their origi- nal form. Most participants’ affiliations identified in this volume are as of the time of the conference, May 21–23, 2003. François Bourguignon and Boris Pleskovic edited this volume. Developmental and copyediting services were provided by Alice Faintich of The Word Doctor. The book was designed by Naylor Design, Inc. Book production and dissemination were coor- dinated by the World Bank Office of the Publisher. Introduction FRANÇOIS BOURGUIGNON AND BORIS PLESKOVIC The Annual World Bank Conference on Development Economics seeks to expand the flow of ideas among scholars and practitioners of development policy from acade- mia, government, and the private sector around the world. By fostering a better understanding of development and the problems developing countries face, the conference aims to enhance policymaking at the World Bank and at its partner insti- tutions. It also provides a forum for exposition by academics and practitioners as they seek to identify and elaborate on new ideas and issues pertinent to development. The 15th conference, held in Bangalore, India, on May 21–23, 2003, was the first such conference to be held in a developing country. The change in locale reflects the growing importance of research done in developing countries and the desire to bring such conferences closer to participants in the developing world. The theme of the conference was accelerating development, which was divided into four topics: fostering entrepreneurship, innovation, and growth; challenges of development in lagging regions; participation, inclusion, and results; and scaling up and evaluation. The conference opened with an address by S. M. Krishna of the government of Karnataka and a keynote address by Azim Hasham Premji of Bangalore’s Wipro Corporation. These were followed by four papers on fostering entrepreneurship, innovation, and growth and the challenges of development in lagging regions. The second day began with keynote addresses by Nicholas Stern, who at that time was with the World Bank, and Rakesh Mohan of the Reserve Bank of India, followed by four papers on participation, inclusion, and results and on scaling up and evalua- tion. Finally, the third day was devoted to specific Indian development issues on gov- ernment initiatives and civil society initiatives and public and private partnerships. The rest of this introduction summarizes the keynote addresses and the papers dis- cussed during the first two days. François Bourguignon is senior vice president, Development Economics, and chief economist at the World Bank. Boris Pleskovic is research manager, Development Economics, at the World Bank. Annual World Bank Conference on Development Economics 2004 © 2004 The International Bank for Reconstruction and Development / The World Bank 1 2 | FRANÇOIS BOURGUIGNON AND BORIS PLESKOVIC Keynote Speeches: Challenges and Opportunities in Indian Development In his opening address, S. M. Krishna discusses all four of the conference’s topics. He notes that the acceleration of development should ensure that there is participation and inclusion, that no region lags behind other regions, and that no section of society is left behind. This implies that development should encompass equity and justice. Krishna points to the strides Karnataka has taken in relation to economic devel- opment and fiscal reforms and Bangalore’s emergence as India’s knowledge capital. He underscores Karnataka’s achievements in public service delivery. The intent has been to reach as many people as possible and to provide service using innovative delivery mechanisms that harness available technology. Karnataka achieved a growth rate of 7.1 percent during the period of its Ninth Plan, compared with 5.5 percent nationwide. To downsize the bureaucracy and redefine its role, Karnataka set up the independent Administrative Reforms Commission. Krishna believes that a public- private partnership provides the best delivery system in the context of moving toward a market-oriented economy. In his keynote address, Azim