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Environment, Poverty, and Economic Growth 251 Karl-Goranmdler Public Disclosure Authorized ¢s-~~~~~~~* D- CD ' . Public Disclosure Authorized i, , ***~*EEhIEEIb) -' 01 Public Disclosure Authorized Public Disclosure Authorized AnnuGa1 -%,t Bank Conference o Development Economics 1997 Editedby BorisPleskovic and Joseph E.Stiglitz The WorldBank Washington,D.C. © 1998 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street NW, Washington, DC 20433, U.S.A. All rights reserved. Manufactured in the United States of America. First printing April 1998 The Annual World Bank Conference on Development Economics is a forum for dis- cussion and debate of important policy issues facing developing countries. The confer- ences emphasize the contribution that empirical and basic economic research can make to understanding development processes and to formulating sound development poli- cies. 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. Summaries are included of floor discussions, which attempt to convey the sense and substance of what was discussed, interventions by participants from the floor, and responses by panelists. These summaries have not been reviewed by the presenters, the discussants, or other participants. Participants' affiliations identified in this volume are as of the time of the conference, April 30-May 1, 1997. The findings, interpretations, and conclusions expressed in this volume are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The material in this publication is copyrighted. Requests for permission to reproduce por- tions of it should be sent to the Office of the Publisher at the address in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Suite 910,222 Rosewood Drive, Danvers, MA 01923, U.S.A. Meta de Coquereaumont, Paul Holtz, Barbara Karni, and Ilyse Zable edited this volume. Garrett Cruce and Wendy Guyette were responsible for composition and layout, and Daphne Levitas helped with proofreading and coordination. All are with Communications Development Incorporated. Annual World Bank Conference on Development Economics is indexed in Human Resources Abstracts, the Index of Economic Articles, the Index of Social Science and Humanities Proceedings, the Index to International Statistics, the Public Affairs Information Service, Sage Public Administration Abstracts, the Standard Periodical Directory, and Ulrich's International Periodicals Directory and online by ABI/INFORM and DIALOG. ISSN 1020-4407 ISBN 0-8213-4115-4 Contents Introduction 1 Boris Pleskovicand Joseph E. Stiglitz OPENING REMARKS Using Research to Reach the Poor 9 James D. Wolfensohn IN MEMORIAM A Tribute to Michael Bruno Stanley Fischer 11 William Easterly 14 KEYNOTEADDRESS An Agenda for Development in the Twenty-FirstCentury 17 Joseph E. Stiglitz Corruption:Catalysts and Constraints 33 Corruption and Development 35 Susan Rose-Ackerman COMMENTS Diego Gambetta 58 EdgardoBuscaglia 62 FLOOR DISCUSSION 66 What Can Be Done about Entrenched Corruption? 69 MichaelJohnston COMMENTS Jeremy Pope 91 Augustine Ruzindana 95 FLOOR DISCUSSION 99 iii iv Contents Incentives and Performance in Public Organizations 101 Incentive Reforms in Developing Country Bureaucracies: Lessons from Tax Administration 103 Dilip Mookherjee COMMENTS Barry Nalebuff 126 Mary M. Shirley 132 FLOOR DISCUSSION 137 Incentives, Efficiency,and Government Provision of Public Services 139 Sherwin Rosen and Bruce A. Weinberg COMMENTS RichardZeckhauser 167 Robert R Inman 173 FLOOR DISCUSSION 178 Leaders in Growth: Can Others Follow? 181 What Can Developing Countries Learn from East Asian Economic Growth? 183 TakatoshiIto COMMENTS Deborah Brautigam 201 Andres Rodriguez-Clare 207 FLOORDISCUSSION 213 The Political Economy of High and Low Growth 217 Alberto Alesina COMMENTS T Ademola Oyejide 238 Ravi Kanbur 242 FLOOR DISCUSSION 245 Poverty and Environment 249 Environment, Poverty, and Economic Growth 251 Karl-GoranMdler COMMENTS Edward B. Barbier 271 John A. Dixon 277 FLOOR DISCUSSION 282 Contents V Where Development Can or Cannot Go: The Role of Poverty-Environment Linkages 285 Ram6n E. L6pez COMMENTS Cielito F Habito 307 Jeffrey R. Vincent 312 FLOOR DISCUSSION 316 Introduction Boris Pleskovic and Joseph E. Stiglitz T he Annual World Bank Conference on Development Economics is designed to expand the flow of ideas among development policy researchers and prac- titioners from all parts of the world. The conference provides a forum for presenting and disseminating cutting-edge thinking on some of the most important issues in development and for revisiting issues of long-standing interest. It thus con- tributes to the global debate on development and offers an opportunity to examine lessons of experience for policy. Finally, this conference series is intended to chal- lenge and improve our understanding of development policy in practice. To advance these goals, conference participants are drawn from a broad range of research, aca- demic, and policymakinginstitutions in both developing and industrial countries. The ninth conference, held at the World Bank on April 30 and May 1, 1997, addressed four themes: corruption, incentives and performance in public organiza- tions, the transferability of high-growth experience, and poverty and the environ- ment. Though the articles in this volume focus on a broad agenda for development-examining the role of national and international institutions in elim- inating corruption and strengthening the rule of law and in promoting sustainable development and raising living standards-several common themes unite them: What is the appropriate role of the government? How should incentives in the pub- lic sector be structured? And what are the relationships among economic growth, poverty, and environmental sustainability? The keynote address by Joseph E. Stiglitz provides a general framework for the discussionsthat follow. He sets out an agenda for development for the twenty-first century that tempers optimism about the possibilities for economic success with the sober reality of the need to adhere steadfastly to appropriate policies. The articles expand on some of the themes Stiglitz outlines. Susan Rose-Ackermanand Michael Johnston discuss the role of government and international institutions in preventing corruption. Dilip Mookherjee and Sherwin Rosen and Bruce Weinberg explore incentives and performance in public organizations. Expanding on Stiglitz'skeynote Boris Pleskovic is deputy administrator, Research Advisory Staff, at the World Bank. Joseph E. Stiglitz is senior vice president, Development Economics, and chief economist at the World Bank. Annual World Bank Conference on Development Economics 1997 ©1998 The International Bank for Reconstruction and Development / THE WORLD BANK 1 2 Introduction address, these articles examine the role of government as an institution and the need to reexamine how regulations and incentive structures can improve the effectiveness of government and the productivity of the economy. Takatoshi Ito and Alberto Alesina look at the experiences of high-growth economies to determine how transferable those experiences are to other developing countries. They note that successful development is enhanced by appropriate gov- ernment policies. Karl-Goran Maler and Ram6n L6pez emphasize the importance of strengthening institutional structures such as property rights and land tenure and of establishing new markets, all of which may positively affect the environment and improve the living conditions of the rural poor. An Agenda for Development In his opening remarks James D. Wolfensohn, president of the World Bank, com- ments on the relevance of the Annual World Bank Conference on Development to some of the new approaches of the World Bank by supporting cutting-edge research, building partnerships with outside institutions, providing background research for project work in client countries, and challenging conventional wisdom. Wolfensohn stresses the importance of research for strengthening development effectiveness, highlighting several research projects that have improved the Bank's lending policies and its understanding of development. The agenda of this year's conference, notes Wolfensohn, reflects the core mission of the Bank. He emphasizes the vital impor- tance of combating corruption and stresses the need for ensuring that anticorrup- tion measures are properly integrated into economic reform. In the keynote address Joseph E. Stiglitz presents an agenda for economic devel- opment for the coming century. Always, he contends, we need to keep in view a broad set of objectives that embrace democratic development, sustainable develop- ment, and improvements in living standards as well as rising gross domestic prod- uct. His address expands on traditional prescriptions that focus on macroeconomic stability, trade liberalization, and privatization to incorporate broader goals (demo- cratic, egalitarian, and sustainable development) and new instruments (such as com- petition and regulatory policy and macroeconomic
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